AIRLINK to hit Rs260/share by June 2025

January 16, 2025 (MLN): Air Link Communication (Pvt.) Limited (PSX: AIRLINK) is poised to reach a price target of Rs260 per share by June 2025.

The stock is trading at an FY25 Price-to-Earnings (PE) ratio of 12.5x but a 5-year Price/Earnings-to-Growth (PEG) ratio of only 0.5x, according to a report by Intermarket Securities Limited (IMS).

AIRLINK capitalized on the local assembling push fueled by the Mobile Device Manufacturing Policy 2020, establishing a state-of-the-art mobile assembly plant.

Reduced tariffs and custom duties under the policy made local assembly economically viable, further complemented by the availability of low-cost skilled labor in Pakistan.

AIRLINK has forged partnerships with globally recognized brands such as Xiaomi, Samsung, Tecno, Apple, and ITEL, both as an assembler and a distributor.

AIRLINK is also diversifying its product portfolio by venturing into smart TVs and laptops, positioning itself for growth in adjacent consumer electronics markets.

AIRLINK is set to introduce Xiaomi Smart TVs and Acer laptops in 2025 (competing with the resale market of laptops) by offering more costeffective alternatives.

Although the overall TV market is witnessing a gradual decline (-3.7% over the past 6yrs), the Smart TV segment of AIRLINK should grow by progressively capturing market share from traditional TV brands.

Looking ahead, Intermarket Securities Limited (IMS) foresees considerable export potential for AIRLINK, contingent on its collaboration with the gov’t to develop a well-structured export model.

This presents extensive opportunities for AIRLINK to diversify and scale within the electronics segment.

AIRLINK’s revenues have grown at a remarkable CAGR of 30% in the past four years, and IMS expects the growth momentum to continue over the next five years (estimated CAGR of 23%).

Key catalysts driving growth in Pakistan’s technology sector include the relatively low broadband penetration, expected to rise from approximately 57% by the end of 2024 to 70-80% in the medium term.

This expansion is further supported by the accelerating transition from feature (2G) phones to smartphones.

Additionally, the introduction of cost-effective Chinese smartphone brands is targeting the country’s young and price-sensitive demographic.

Additionally, the market is set to benefit from the diversification of product offerings, with upcoming launches like Xiaomi’s Smart TV and Acer’s budget-friendly laptops.

Key downside risks to our thesis include supply-chain disruptions, such as those caused by import restrictions in Pakistan similar to those in 2022-23.

Additionally, the threat of new entrants and shifting consumer preferences toward mobile brands outside AIRLINK's portfolio.

Furthermore, the rapid pace of technological advancements presents a challenge.

AIRLINK is one of the largest assemblers, distributors, and retailers of smartphones in Pakistan.

Select Technologies (Pvt.) Limited, a wholly-owned subsidiary of Air Link Communication Limited, specializes in the manufacturing and assembly of smartphones and related products.

The subsidiary plays a critical role in advancing AIRLINK’s mission of reducing reliance on imports by focusing on local assembly.

For FY25, unit sales are projected to reach 4.8mn, with an expected average unit price of US$115, resulting in estimated revenues of Rs165 billion – a 27% YoY increase.

Over the next five years, topline growth is anticipated to remain above 20%, ultimately stabilizing as Pakistan’s broadband penetration nears its upper limit of around 90% from c.56% presently.

Starting in FY27, Air Link Communications will also transition to the normal tax regime, which is expected to normalize net profit margins to around 3.6% from average of c.4% in the last two quarters

While the overall television market is in decline, projected to reach around 3.0mn units by 2029 from 3.2mn in 2020, the demand for Smart TVs is expected to grow, taking a larger share of the overall market from traditional televisions.

The Smart TV segment is anticipated to account for around 30-40% of the total market, translating to a market size of approximately 1.2mn units by FY29f.

The brokerage house has assumed that AIRLINK will achieve 8% of the Smart TV market, of about 90,000 units, by 2029.

AIRLINK is set to launch Acer laptops by the end of FY25, targeting a segment currently dominated by the resale market, which is significantly larger than the market for first-hand and higher-end laptops.

The company aims to introduce laptops priced below Rs100,000 ($360), focusing on affordability without compromising performance by offering outdated models.

This price point is expected to appeal to a broad customer base, particularly students, for whom owning a laptop has become an increasingly essential tool for education and entertainment, especially after the Covid-19 pandemic.

Chinese enterprise ADM Group has announced a $350mn investment in Pakistan’s EV sector, backed by the Special Investment Facilitation Council (SIFC).

This includes plans to establish 3,000 EV charging stations nationwide, creating a robust ecosystem for electric vehicles.

These developments provide an ideal environment for AIRLINK to collaborate with Xiaomi and capitalize on the growing demand for EVs in Pakistan.

AIRLINK recognizes the growing importance of Environmental, Social, and Governance (ESG) initiatives and remains committed to integrating sustainability, community impact, and strong governance in its operations.

Notably, it has established 17 solar-powered water wells in Thar to provide clean and sustainable water sources for local communities facing severe water scarcity.

AIRLINK complies with the Code of Corporate Governance, 2019, ensuring ethical and transparent operations.

The presence of a female director on the Board reflects its commitment to gender diversity and inclusivity.

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