PEL intends to split home appliances and power division into two independent companies: PACRA

July 14, 2022 (MLN): Pak Elektron Limited (PEL), intends to partner with foreign investors to split home appliances and power division into two independent companies, a latest report issued by Pakistan Credit Rating Company (PACRA) said.

This shall benefit PEL in achieving operational efficiency, technological efficiency and real-time growth opportunities.

While maintaining the company’s rating at A+ for the long-term and A1 for the short-term, the rating agency has forecasted a stable outlook for the company.

The ratings reflect PEL’s diversified revenue stream and strong presence in appliances and power division including, power transformers, distribution transformers, energy meters and switch gears. Factors that shape the household appliances market are an increase in technological advancements, rapid urbanization, growth in the housing sector, a rise in per capita income, improved living standards, and a surge in the need for comfort in household chores.

As per the rating agency, in recent times, the inclination of consumers toward eco-friendly and energy-efficient appliances boosts the market growth. Similarly, factors driving the power division segment are linked with accelerated electricity consumption, new power projects, local industry revival, rehabilitation of power distribution networks, infrastructure developments, and new commercial/residential constructions.

The demand for household appliances is generated from both first-hand and second-hand markets whilst the power sector primarily drives its demand from new projects/orders.

The Company holds onto a well-thought and sustained brand positioning in home appliances segments followed by the targeted market leaders. Resultantly, the Company was able to witness significant sales growth of around 48.9% during CY2021., the report said.

PEL sustained margins despite higher material costs. Coverages are on the lower side due to a significant quantum of borrowings. In addition, PEL’s capital structure is characterized by intermediate leveraging, constituted by STBs. During Apr-22, the Company released the right shares for subscription to fuel its equity base.

Going forward, the management intends to materialize the envisaged strategies by partnering with foreign investors to split the home appliances and power division into two independent companies, the report noted.

To note, the stock of the company is currently being traded at Rs16.27 (3:10 PST), up by 2.07% or Rs0.33 from yesterday’s price.

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