PACRA maintains entity ratings of Airlink Communication

November 23, 2023 (MLN): Pakistan Credit Rating Agency Limited (PACRA) has maintained entity ratings of Air Link Communication Limited (PSX: AIRLINK) at "A" for long term and "A1" for short term with a stable outlook forecast, latest press release issued by PACRA showed.

The ratings reflect Airlink’s sustainable business fundamentals underpinned by its solid market position. The Company is considered to be an official partner of multiple leading global brands to ensure diversified earnings from its business line.

Pakistan’s telecom industry is moving forward at a reasonable pace.

With expanding net coverage, myriad options of mobile devices available, ever-increasing demand for technology, and ubiquity of mobile phones and their uses among a wide cross-section of 220 million people, the local market depicts great potential.

Furthermore, the local assembling industry is evolving from the infancy to the mounting stage post-execution of DIRBS, curbing illegal import channels in the country to target domiciliary production and then exports.

PTA also issued MDM authorizations to 30+ foreign & local companies to create more jobs in the technical sector and enable consumers to buy locally.

In nine months of Jan’23 to Sep’23, the local plants manufactured/assembled 13.02m handsets as compared to 1.09m commercially imported ones.

Favorable policies, trade and investment liberalization, and healthy competition promote shared industry prosperity.

Following the trend, Airlink captures a market share of around 22% in mobile phone distribution.

It has a nationwide network linked with over 16+ hubs & regional offices, 1100 + wholesalers, and 4,000+ retailers with after-sales support service centers in all major cities.

During 1QFY24, Airlink witnessed a significant topline growth of 2.72x on a year-on-year basis primarily on the back of rising volume from the assembling operating segment, followed by higher prices of mobile devices.

The company’s revenue contribution from the assembly side was fueled as an outcome of its backward integration strategy when Airlink joined hands with Xiaomi to manufacture/assemble its mobile phones and allied items in Pakistan by incorporating a wholly owned subsidiary “Select Technologies (Pvt) Limited”.

Besides, the company retained its profitability matrix during the review period.

Airlink’s capital structure is moderately leveraged; mainly comprised of STBs. The financial risk profile is reflected by an improved working capital cycle, comfortable coverages, and healthy cash flows.

The ratings are dependent on the company’s ability to sustain its relative position amidst a highly changing industry environment.

As business grows, prudent financial discipline - particularly in working capital structure, is essential to uphold the ratings.

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