Lahore: The Pakistan Credit Rating Agency Limited (PACRA) has assigned initial ratings to Pak Elektron Limited (PEL) for its debt instrument, PPSTS II, valued at PKR 2 billion with a maturity date of December 2024. The ratings are A+ for the long term and A1 for the short term, with a stable outlook.
According to a statement by Pakistan Credit Rating Agency Limited, PEL, a prominent engineering enterprise in Pakistan, is recognized for its diverse range of household appliances and electrical equipment. The ratings reflect PEL’s broad revenue streams and established presence in both the appliances and power sectors, which include power and distribution transformers, energy meters, and switchgears.
The household appliances market’s growth is largely driven by technological advancements, urban expansion, and rising per capita income, among other factors. In the current calendar year, economic conditions in Pakistan have shown signs of recovery, aided by stability in foreign exchange rates and a decline in inflation and interest rates, which have boosted consumer confidence.
During the first nine months of 2024, PEL achieved a significant revenue growth of approximately 42%, with total revenues reaching PKR 41,353 million. This growth was primarily driven by increased volumes in the Appliances Division, contributing 58% to total sales, while the Power Division recorded an 11% revenue growth, contributing 42% to overall sales.
Management has highlighted PEL’s strong market presence, with a dominant market share in areas such as power transformers and switchgears. However, the Home Appliances Division experienced a dilution in market share due to several factors impacting the sector.
Financially, PEL maintains robust coverage ratios and healthy cash flows, though it operates with a leveraged capital structure relying on short-term loans for working capital needs. The company is also expanding its operations by establishing a wholly-owned foreign subsidiary in the UAE, which will focus on commercial trading activities and is expected to enhance its international market presence.
The ratings are contingent upon improvements in revenue, profitability, and market share, while maintaining sufficient cash flows and coverage. Effective management of liquidity and financial risks remains crucial for sustaining the ratings.
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