Lahore, December 28, 2022 (PPI-OT):Pak Elektron Limited (‘PEL or ‘the Company) is an eminent engineering corporation in Pakistan which manufactures major household appliances and electrical equipment. The ratings reflect PEL’s diversified revenue stream and strong presence in appliances and power divisions including, power transformers, distribution transformers, energy meters, and switch gears. Factors that shape the household appliances market are an increase in technological advancements, rapid urbanization, and a surge in the need for comfort in household chores. In recent times, the inclination of consumers toward eco-friendly and energy-efficient appliances further boosts the market growth.
Similarly, factors driving the power division segment are linked with new power projects, rehabilitation of power distribution network, infrastructure developments, and new commercial/residential constructions. The emerging challenges to the growth of this market are the high cost of appliances, changing customer preferences, and evolving technology. Barriers to market entry are high as it is dominated by well-established brands and requires extensive capital investment. The sector is primarily involved in assembling imported parts; dependent on global raw material prices, making it susceptible to external dynamics. The Company holds onto a well-thought and sustained brand positioning in home appliances segments followed by the targeted market leaders.
PEL sustained margins despite higher material costs. Coverages are on the lower side due to a significant quantum of borrowings. PEL’s capital structure is characterized by intermediate leveraging, constituted by STBs. Going forward, the management intends to materialize the envisaged strategies by partnering with foreign investors to split the home appliances and power division into two independent companies. This shall benefit PEL in achieving operational efficiency, technological efficiency, and real-time growth opportunities.
The ratings are dependent upon the management’s ability to improve margins while sustaining its market share. Prudent management of the working capital, and maintaining sufficient cash flows and coverages are essential for the ratings. Any significant change in margins and coverages will impact the ratings.
For more information, contact:
Analyst,
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore, Pakistan
Tel: +92-42-5869504-6
Fax: +92-42-5830425
Email: hammad.rashid@pacra.com
Website: www.pacra.com