Pak Elektron off to a flying start

Pak Elektron (PSX: PAEL), one of the biggest manufacturer of white goods and power products in Pakistan, announced its result for the first quarter of 2017. The earnings per share of the company clocked in at 2.2 rupees up a massive 96 percent compared to same period last year.

The top-line of the aided by both its appliances and segment grew by 36 percent. During the back end of last year, the company had introduced new products and refreshed its appliances range which helped in bringing in new customers.

Additionally, the investment in power segment has started to pay-off for the company as well. With major infrastructure projects underway in the country, the demand for power products such as transformers is inching up each day.

The margins of the company have also been improving over the years and during this quarter, gross margins went up by 4 percent. Major contribution coming from lower of cost materials and power segment sales. Competition in the appliances category is heating up and to maintain its market share, the company has had to give discounts.

On the expense side, both distribution and administrative expenses increased by 74 percent and 17 percent respectively. On the other hand, finance cost declined by 2 percent due to lower interest rates.

However, a major chunk of the bottom-line has come from lower taxation which compared to last year dropped 7 percent. Tax rate for the reported quarter is 21 percent due to tax credits and adjustment of losses during previous years.

At the bourse, the stock has been doing relatively well and is near its all-time high. Even in a dull market, good volume can be witnessed in the stock. The analysts covering the company are also bullish and expect further upside in the stock price.

Looking forward, this year can turn out to be really good for Pak Elektron as their new products have been received well in the market which could show their true potential during summer months. Sales of transformers should track the ongoing expansion in power sector. Margins, however, could come down with competition breathing down the neck.