PAEL: Growing on changing dynamics
Pak Electron Limited (PAEL) is not included in AZEE Universe but changing fundamentals warrant us to give recommendation on the scrip. PAEL is the pioneer manufacturer of electrical goods in Pakistan. The Company comprises of two divisions; each offering a wide range of products. Power division manufactures and distributes transformers, Energy Meters, Switchgear and Electrification works. Appliances division manufactures, assembles and distributes Refrigerators, Air Conditioners, Deep Freezers, Microwave Ovens and washing machines.
Higher earnings expected led by better gross margin
PAEL is expected to witnessed robust growth in profitability as its bottom line to rise by 241% to Rs 2,070 million (EPS: Rs 7.02) in CY14 compared to Rs 607 million (EPS: Rs 4.04) in CY13. Phenomenal growth in earnings expected owing to improve gross margin, lower financing cost and better penetration of high margin products. The Appliances Division and EPC Division performance was positively impacted as a consequence of growth across all segments and cost control measures. While the major driver remain higher gross margin of 40% against average gross margin during CY11 at 8%. Furthermore, there was improved capacity utilization, lower operating cost, improved Rupee USD parity and material cost reduction as a result of major R&D initiatives in our company’s main products.
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