PAEL set to near Rs89 per share

October 03, 2025 (MLN): Pak Elektron Limited (PSX:PAEL), one of Pakistan’s leading electrical goods and home appliance manufacturers, is to reach a target price of Rs88.7 per share by June 2026, implying an upside potential of almost 48% from its last closing price of Rs59.93.

The outlook is supported by strong export momentum, growing appliance demand, and expanding margins, according to a research report by Arif Habib Limited .

Arif Habib Limited has initiated coverage on PAEL with a BUY rating, citing the company’s robust earnings trajectory, attractive valuations, and export-driven turnaround.

The brokerage highlights that PAEL is trading at forward P/E multiples of 6.5x (CY26f) and 5.5x (CY27f), a steep 48% discount to its five-year historical average of 12.4x, making it an undervalued growth play in the market.

Exports remain a key growth catalyst, with PAEL securing $44m in distribution transformer orders from the U.S. in 2025 and targeting $100m in export revenues by CY26f.

The company is well-positioned to capture U.S. demand as Washington imposes steep tariffs on Chinese suppliers and considers further barriers on Mexico and Canada, which together supply 80% of America’s transformer imports but face capacity constraints.

In contrast, Pakistan enjoys a lower tariff rate of 19%, giving PAEL a strong competitive edge. Coupled with faster delivery timelines of 8–9 months versus the industry average of two years, and internationally compliant, cost-effective products, PAEL is expected to lift the power division’s contribution to more than 39% of revenues by CY27f, the brokerage noted.

On the domestic side, the appliance division is poised for sustained growth, led by rising demand for refrigerators and air conditioners. Revenues surged 80% YoY in CY24 to Rs40bn, while 1HCY25 sales grew 54% YoY to Rs35.4bn.

Partnerships with Electrolux and Panasonic in 2025 are expected to further strengthen the company’s market positioning.

Margins are also improving. While domestic gross margins have hovered between 26% and 27% in recent quarters recording 26.9% in 2QCY25 amid volatile input costs and stiff competition exports are set to drive blended margin expansion.

With exports projected to climb from 6% of revenues currently to over 19% by CY26f, gross margins could rise by 3–5 percentage points to around 30.5%. Net margins have already improved from 5% in CY24 to 9.8% in 1HCY25, providing a buffer against cost pressures and highlighting the earnings upside from higher-margin export sales.

Profitability is set to witness a strong upswing. Arif Habib forecasts EPS to rise to Rs4.9 in CY25e and Rs9.26 in CY26f, with impressive earnings growth of 82% and 89% YoY, respectively.

 Source (s): Company Financials, AHL Research

However, dividend payouts are expected to remain on hold in the near term, as PAEL prioritizes working capital management to fuel its export-led growth. The brokerage expects dividends to resume by CY28f, initially at a 40% payout ratio, translating into a projected DPS of Rs5 in CY28f–CY29f and Rs6 in CY30f.

Nonetheless, Local demand for power products may stay subdued amid persistent challenges in Pakistan’s power sector, while the company’s growing reliance on exports leaves it vulnerable to global trade disruptions and geopolitical tensions.

In addition, rising competition in the appliance and distribution businesses could limit pricing power, while macroeconomic instability and inflationary pressures may weigh on consumer demand.

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