AKD Securities Limited Equity Research – Daily Report

Karachi, April 12, 2019 (PPI-OT): PAEL: Dealing with a tough audience

Reading annual accounts for PAEL, we prune our estimates based on abundant demand headwinds for both business segments, GMs caving-in to rising cost pressures and higher finance costs as the firm supplants working capital outflows with (now costlier) ST borrowing.

Moreover, dismal sales performance in CY19 crystallizes our soft outlook with macro headwinds, combined with additional constraints on the horizon (power tariff hikes, controlled public sector power outlays), keeping us tilted towards subdued earnings growth over the medium term.

On the cost side, subdued COGs headers and below the line expense elements allude to the firm suppressing expansionary (push based sales) efforts, where the launch of the LED TV segment was relatively muted and failed to garner demand.

Amending our estimates based on observed financial metrics in detailed accounts we map out a terse macro backdrop, reflected in stretched CY19/20 P/E of 10.3/7.1x, , where we find our TP of PkR 23.6/sh implies a Neutral stance.

We flag any pickup in public sector power spending and additional barriers to import of appliances as key developments which would make us re-visit our investment case.

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