Avanceon Limited: performance and outlook

Avanceon Limited (PSX: AVN) was incorporated in Pakistan as a private limited company in 2003 and was converted into a public limited company in 2008. The company is principally engaged in the trading of products related to automation and control equipments as well as providing related technical services.

Pattern of Shareholding

As of December 31, 2025, AVN has a total of 422.409 million shares outstanding which are held by 14,816 shareholders. Directors, CEO, their spouse and minor children are the major stakeholders of AVN holding 69.28 percent shares followed by local general public having a stake of 19.43 percent in the company. Banks, DFIs and NBFIs have a representation of 5.60 percent in the outstanding share capital of the company. About 1.14 percent shares of AVN are also held by insurance companies. The remaining shares are held by other categories of shareholders.

Historical Performance (2021-25)

Except for a marginal downtick in 2025, AVN’s topline has been on the upswing in all the years under consideration particularly in 2023 where the company boasted the most staggering growth.

The bottomline has also registered phenomenal growth until 2022 after which it diminished. The onus of tremendous bottonline growth is on “other income”. AVN’s other income is the reason why its operating and net profit margins are way above its gross profit margin in most of the years.

The GP margin of the company followed a downward trajectory until 2022 once to bounce back in 2023. AVN’s GP margin stayed intact in 2024 followed by a drastic fall in 2025. Conversely, its OP and NP margin registered a dip in 2020. Both the margins strongly rebounded in 2021 and 2022 followed by a decline thereafter.

The detailed performance review of the period under consideration is given below.

2020 brought in 15.42 percent year-on-year rise in the toplijne of AVN which clocked in at Rs. 1547.15 million. This came on the back of growth in both local and export sales. Project revenue which includes hardware and software automation, efficiency solution as well as SCADA (supervisory, control and data acquisition) turned out to be the major growth contributor during the year.

Cost of sales jacked up by 22.70 percent year-on-year due to installation charges and transfer of business to Octopus Digital Limited, a subsidiary of AVN. Gross profit grew by 4.61 percent year-on-year in 2020, however, GP margin shrank to 36.48 percent. Operating expense posted a notable decline of 42.72 percent year-on-year in 2020 as unlike last year, no provision for expected credit losses was booked this year.

Other income also slid by 8.63 percent year-on-year in 2020 due to a steep fall in exchange gain during the year. Operating profit posted 14 percent year-on-year growth in 2021; however, OP margin posted a marginal downtick to clock in at 53.85 percent. Despite posting a drop in 2020, other income was robust enough for AVN to translate into OP margin in excess of GP margin.

Finance cost increased by 11.66 percent year-on-year in 2020 despite drop in discount rate as the company availed Refinance Scheme by SBP for the payment of salaries and wages and also obtained increased running finances during the year.

The bottomline grew by 5.71 percent year-on-year in 2020 to clock in at Rs.673.839 million with NP margin of 43.55 percent. EPS clocked in at Rs.3.11 in 2020.

In 2021, AVN’s topline mustered 18.62 percent year-on-year growth to clock in at Rs.1835.21 million. Local sales crossed Rs.1 billion mark in 2021 and export sales also posted a reasonable growth.

Cost of sales spiked by 25.61 percent year-on-year in 2021 due to greater order generation which increased the cost of materials consumed, installation charges as well as salaries expense. Gross profit grew by 6.45 percent year-on-year in 2021 but GP margin shrank to 32.73 percent from GP margin of 36.48 percent recorded in 2020.

Administrative and distribution expense multiplied by a whopping 135.62 percent year-on-year in 2021 as the company booked massive provisions for expected credit losses from related parties.

Yet again, other income came to the rescue. With 128 percent year-on-year growth, other income stood at 53.4 percent of AVN’s topline in 2021 and gave a strong push to the operating profit which grew up by 44.48 percent year-on-year in 2021 with OP margin of 65.60 percent. This was against the OP margin of 53.85 percent recorded in 2020.

AVN’s other income mainly comprised of hefty exchange gain as well as dividend income from subsidiary companies.

Finance cost slumped by 17.95 percent year-on-year in 2021 due to monetary easing despite the fact that the company had increased its short-term financing during the year. Net profit grew by 51.54 percent year-on-year in 2021 to clock in at Rs.1021.11 million with NP margin of 55.6 percent. This was against the NP margin of Rs.43.55 recorded in 2020.

EPS slightly reduced to from Rs. 3.11 in 2020 to Rs.3.09 in 2021 as AVN’s share capital grew by issuing bonus shares besides issuance of shares under employee share option scheme.

In 2022, AVN achieved only 1.6 percent year-on-year growth in its topline which was recorded at Rs. 1864.52 million. This was because local sale of goods tumbled while export sales and services continued to inch up during the year. Cost of sales grew by 5.77 percent year-on-year on the back of higher payroll expense, installation charges, travelling related to engineering services as well as import cost.

Gross profit dwindled by 6.97 percent year-on-year in 2022 while GP margin dropped to 29.97 percent. Greater allowance for expected credit losses culminated into 91.82 percent year-on-year surge in operating expense in 2022. Other income grew by 121.19 percent year-on-year in 2022 on the back of huge exchange gain as well gain recognized on acquisition of EmpiricAI (Private) Limited.

Other income stood at 116.26 percent of AVN’s sales in 2022 and resulted in 66.54 percent hike in operating profit. OP margin staggeringly increased to 107.52 percent in 2022. Finance cost magnified by 174.44 percent year-on-year in 2022 due to excessive hikes in discount rate coupled with an increase in lease liabilities during the year.

Bottomline grew by 70 percent year-on-year in 2022 to clock in at Rs.1736.812 with NP margin of 93.15 percent. EPS clocked in at Rs.4.55 in 2022.

AVN posted a stunning 53.26 percent year-on-year growth in its topline in 2023 which was recorded at Rs.2857.59 million. This was mainly on account of robust local sales of goods and services recorded during the year.

Cost of sales grew by 47.83 percent year-on-year in 2023, mainly on account of higher prices of raw material consumed due to inflationary pressure and decline in the value of local currency.

The company was able to pass on the onus of cost hike to its consumers which resulted in 65.94 percent stronger gross profit recorded in 2023 with GP margin ticking up to 32.45 percent.

Administrative and distribution expenses slid by 47.75 percent in 2023 as the company booked allowance for ECL as other expense in 2023. This pushed other expense up by 6225.97 percent in 2023.

Other income dropped by 13.49 percent in 2023 due to high-base effect as AVN recognized gain on acquisition of EmpiricAI (Private) Limited in 2023. The company recorded 2.73 percent slide in its operating profit in 2023 with OP margin drastically falling to 68.24 percent from its peak level of 107.52 percent attained in 2022.

Finance cost grew by 36.82 percent in 2023 on account of higher discount rate.

AVN’s net profit registered a plunge of 6.43 percent to clock in at Rs.1625.082 million in 2023. This translated into EPS of Rs.3.87 and NP margin of 56.87 percent.

In 2024, AVN registered year-on-year growth of 8.58 percent in its topline which clocked in at Rs.3102.84 million. The growth was mainly driven by local services rendered and export project revenue.

Cost of sales also inched up by 8.58 percent in 2024 resulting in similar growth achieved in gross profit. GP margin stayed intact at 32.45 percent in 2024.

Administrative and distribution expense escalated by 51.77 percent in 2024 due to considerable spike in payroll expense, employee share option expense as well as higher fee & subscription charges incurred during the year.

Other expense slid by 45.56 percent in 2024 as allowance of ECL booked against related parties significantly shrank during the year. Other income also dwindled by 68.84 percent as no exchange gain was recognized during the year.

Operating profit deteriorated by 60.93 percent in 2024 with OP margin sliding down to 24.56 percent. Finance cost tapered off by 11.32 percent in 2024 due to the onset of monetary easing cycle during the year.

AVN’s net profit slumped by 66.83 percent to clock in at Rs.539.096 million in 2024. This translated into EPS of Rs.1.34 and NP margin of 17.37 percent – the lowest level hit during the period under consideration.

In 2025, AVN posted an insignificant 0.04 percent year-on-year downtick in its topline which stood at Rs.3101.47 million. This was due to high-base effect as large number of orders with high margins was received in 2024.

Conversely, 2025 remained slow on account of delays in approval from certain clients. In local market, revenue from sale of goods ticked up while project revenue and revenue from services rendered ticked down.

In export market, project revenue and IT enabled office support revenue grew while agency commission ticked down. Major portion of export revenue pertained to Pakistan (66 percent) followed by the UAE (17 percent) KSA (10 percent) and Qatar (7 percent).

Cost of sales mounted by 11.48 in 2025 due to inflationary pressure. This pushed gross profit down by 24 percent in 2025 with GP margin falling down to its lowest level of 24.66 percent. Operating expense posted 2.73 percent year-on-year drop in 2025 due to lower payroll expense and lesser employee stock option expense.

Other expense posted 71.95 percent surge in 2025 due to allowance booked for ECL on certain projects. Conversely, other income deteriorated by 8.45 percent in 2025 due to lesser dividend income from subsidiary. AVN’s operating profit eroded by 60.71 percent in 2025 with OP margin falling down to 9.65 percent.

Finance cost dipped by 8.38 percent in 2025 due to monetary easing. This was despite greater short-term borrowings outstanding. AVN posted 88.84 percent plunge in its net profit which clocked in at Rs.60.181 million in 2025. This translated into EPS of Rs.0.142 and NP margin of 1.94 percent in 2025.

Recent Performance (1QCY26)

During the first quarter of CY26, AVN posted a massive 62.30 percent year-on-year growth in its topline which clocked in at Rs.686.67 million. This was due to planned execution and revenue recognition of the projects assumed in the previous year.

Increase in direct dost due to geopolitical tensions in the Middle East resulted in GP margin of 29.84 percent in 1QCY26 versus GP margin of 32.74 percent recorded in 1QCY25.

Operating expense surged by 27.75 percent in 1QCY26 due to increased project execution which increased payroll expense, utility expense, travelling expense etc. Other expense escalated by 742 percent in 1QCY26 due to exchange loss.

However, other expense was offset by other income of Rs.45 million recognized during the period which mainly comprised of reversal of provision booked on ECL.

AVN posted 28.34 percent stronger operating profit in 1QCY26 with OP margin clocking in at 16.92 percent versus OP margin of 21.40 percent recorded in 1QCY25. Finance cost mounted by 12.94 percent in 1QCY26 despite lower discount rate. This was due to higher outstanding liabilities at the end of the period under review.

Net profit grew by 44.46 percent in 1QCY26 to clock in at Rs.64.546 million. This translated into EPS of Rs.0.15 and NP margin of 9.40 percent in 1QCY26 versus EPS of Rs.0.10 and NP margin of 10.56 percent registered in 1QCY25.

Future Outlook

AVN’s expansion into new geographical markets as well as new products and services categories will drive growth in the coming times.

The acquisition of EmpiricAI has already paved its way in the advanced analytics market. Increase in export sales will be driven by strategic focus on key markets such as KSA, UAE, Qatar, Oman and Nigeria. Moreover, stability in local economic and political conditions provides impetus for improved local sales.

Recently, AVN’s fuel retail business has obtained an order worth USD 6.3 million from one of the largest oil companies of Pakistan. This signifies the company’s trusted position in the automation and digitalization of the downstream energy sector.