Karachi, Air Link Communications held its FY23 analyst briefing session today, laying out strategic plans for expanding its product line and diversifying its business. The company detailed its efforts to compete in the smart television market and its broader aspirations for growth and diversification.
According to AKD Research, Air Link is positioning its Xiaomi smart televisions between Samsung and TCL, aiming to match Samsung's quality while maintaining price points similar to TCL. The company anticipates initiating production by March 2024, following a trial run in February 2024, with expected gross margins of around 18% and net margins of 6%. The management also discussed their high-tech manufacturing facility, which utilizes robotics, and their ongoing partnership with Xiaomi, which may include future technology transfer, although specific timelines are not yet defined.
Air Link's localization strategy involves a phased approach, starting with assembly, moving towards manufacturing with local parts, and ultimately aiming for technology development. The company initially employed 36 Xiaomi engineers, which has been reduced to 13, with a focus on increasing the number of local engineers trained in China.
In terms of capital expenditure for the smart TV project, the management indicated that the amount is not substantial enough to burden the company's cash flows. They have all necessary facilities available within their plant. Marketing responsibilities and associated costs for the brand remain with Xiaomi. The company is also in discussions with the government regarding export-related benefits.
With a current market share of 20%-23% in smartphones, Air Link has prepared a strategy with Xiaomi to incorporate exports into their sales model to compensate for any potential forex outflows due to import restrictions. The management stated that there are no current import restrictions.
The company's revenue mix consists of 57% from assembly and the remainder from distribution. With positive operating cash flows, available lines of credit, and a cushion for finance costs, the management believes the company can easily achieve a topline of PkR100 billion in FY24, supported by effective working capital management.
Air Link also sees potential for significant annual exports in the sector, possibly reaching ~US$15 billion with the right government incentives. The decision to acquire Shell Pakistan stems from a desire to diversify into an essential commodity producer, providing a buffer for the company’s core business in uncertain times.