Pak Electron Limited (PEL)

PEL is the pioneer manufacturer of electrical goods in Pakistan. In 1956, the Company was set
up by Malik Brothers in technical collaboration with M/s AEG of Germany (“AEG”) to
manufacture transformers, switchgear and electric motors. AEG exited from the venture and sold
their share of PEL to the Malik Brothers in the late 1960s, which was subsequently acquired by
the Saigol Group of Companies in 1978. Since its inception, the Company has always been
contributing towards the advancement and development of the engineering sector in Pakistan by
introducing a range of quality electrical equipment, home appliances and by producing hundreds
of engineers, skilled workers and technicians through its apprenticeship schemes and training
programmers. Until the acquisition by the Saigol Group, PEL was solely catering the power
equipment market. The Company ventured into home appliances market in 1981 after acquisition
as a part of the Group’s long term strategy of diversification.

APPLIANCES DIVISION

• Refrigerators
• Air Conditioners
• Deep Freezers
• Microwave Ovens
• Water Dispensers
• LED TVs
• Washing Machine
• Small Domestic Appliances
(Electric Kettle, Toaster,
Sandwich Maker, Steam Iron)

Financial Position

VERTICAL ANALYSIS
  2019 2018
  Rs. In M %age Rs. in M %age
EQUITY AND LIABILITIES  
   
Equity 30,688 59.81 30,280 58.12
Non-current liabilities 5,611 10.94 5,830 11.19
Current liabilities 15,012 29.26 15,990 30.69
TOTAL EQUITY AND
LIABILITIES 51,311 100 52,100 100
   
ASSETS  
   
Non-current assets 24,842 48.41 23,752 45.59
Current assets 26,469 51.59 28,348 54.41
TOTAL ASSETS 51,311 100 52,100 100
   
PROFIT OR LOSS  
   
Revenue 37,621 100 38,990 100
 Gross profit 6,573 17.47 6,997 17.95
Operating profit 3,364 8.94 3,663 9.39
Profit before taxation 881 2.34 1,557 3.99
Profit after taxation 879 2.34 1,371 3.52

COMMENTS ON VERTICAL ANALYSIS

Non-current assets have increased to 48.41% as compared to 45.59% at the close of 2018 primarily on the
back of acquisition of property, plant and equipment to support the increasing range of products offered
by the Company. Non-current liabilities have decreased to 10.94% from 11.19% at the close of 2018 due
to repayment of long term debt. Current Liabilities and current assets have both decreased due to
reduction in short term debt and recovery of investment in inventories respectively resulting in lowering
of net current assets. Profit margins decreased due to increase in input cost, interest rates and depreciation
of Pak Rupee.

Financial Position

HORIZONTAL ANALYSIS

2019 Rs. in 2019 vs. 2018

  M %age 2018 Rs. in M
EQUITY AND LIABILITIES  
   
Equity 30,688 1.35 30,280
Non-current liabilities 5,611 (3.76) 5,830
Current liabilities 15,012 (6.12) 15,990
TOTAL EQUITY AND LIABILITIES 51,311 (1.51) 52,100
   
ASSETS  
   
Non-current assets 24,842 4.59 23,752
Current assets 26,469 (6.63) 28,348
TOTAL ASSETS 51,311 (1.51) 52,100
   
PROFIT OR LOSS  
   
Revenue 37,621 (3.51) 38,990
Gross profit 6,573 (6.06) 6,997
Operating profit 3,364 (8.17) 3,663
Profit before taxation 881 (43.43) 1,557

Profit after taxation 879 (35.94) 1,371

COMMENTS ON HORIZONTAL ANALYSIS

Non-current assets have increased as compared to 2018 primarily on the back of acquisition Of property,
plant and equipment to support the increasing range of products offered by the Company. Non-current
liabilities have decreased due to repayment of long term debt. Current liabilities and current assets have
both decreased due to reduction in short term debt and recovery of investment in inventories respectively
resulting in lowering of net Current Assets by 7.29%. Decline in sales revenue is attributable to lower per
capital disposable income and slow Ordering for the Company’s power products by WAPDA Discos.
Profit margins

Statement of Profit or Loss for the FY 2018 & 2019

  PEL
  (Rupees in'000')
  2019 2018
Sales - net of sales return 37,621,269 38,990,247
Less: Sales tax and trade discount on invoices 9,721,351 10,544,936
Sales - net 27,899,918 28,445,311
   
Less: Cost of Sales 21,326,893 21,448,040
Gross Profit 6,573,025 6,997,271
   
Add: Other income 33,887 17,977
  6,606,912 7,015,248
Less Operating Expenses & Others  
Marketing, selling and distribution costs 1,956,380 2,207,445
Administrative Expenses 1,229,762 1,073,652
Other Expenses 56,872 71,050
  3,243,014 3,352,147
   
Operating Profit 3,363,898 3,663,101
   
Less: Finance costs 2,480,088 2,103,343
  883,810 1,559,758
Less: Share of loss of associate 2,806 2,456
Profits before taxation 881,004 1,557,302
Less: Taxation 2,411 185,833
Profit for the year   878,593 1,371,469
Comparison of P& L
As compare to 2018 in 2019 the net sales were decrease. The main issue was Covid-
19.As we are seeing that the Cost of sales also decrease due to this issue. In 2019 the
company’s operating expenses also decreased. The finance cost increased due to taking
other services by company from consultants. In short the effect touched the less profit
than 2018 due to pandemic. But the company’s position was better there.

RATIO ANALYSIS 2 years comparison

   
Liquidity Ratio Unit 2019 2018
Current Ratio Times 1.76 1.77
Quick Ratio Times 1.19 1.04
Cash to Current Liability Times 0.03 0.03
   
Capital Structure ratio   2019 2018
Debt to Equity Ratio % 13.87 13.87
Financial leverage ratio Times 0.51 0.57
interest cover ratio Times 1.52 2.3
   
Profitability Ratio   2019 2018
Gross Profit Margin % 23.56 24.6
Net Profit Margin % 3.15 4.82
EBIT Margin Million 33.83 37.65
Return on Capital Employed % 1.87 0.0312
Return on Equity % 3.56 5.79
   
Turnover Ratio   2019 2018
Total Asset Turnover Ratio Times 0.54 0.55
Fixed Asset Turnover Ratio Times 1.62 1.75
Inventory Turnover Ratio Times 2.3 2.27
No. of Days in inventory Days 159 161
Debtor Turnover Ratio Times 3.86 3.73
No. of Days in Debtors Days 95 98
   
Market Ratio   2019 2018
Price to Earnings Ratio Times 16.12 9.33
Book Value Per Share Rupees 27.07 24.9

Comment on ratio analysis

Liquidity Ratios

Current ratio as at close of 2019 has remained substantially the same as at the close of 2018 due to
efficient liquidity management, which also resulted in an improved cash flow from operations to sales

Capital Structure Ratios

Financial leverage improved in the current year to 0.51 times which is reduced by 11.33% as compared to
the year 2018 when it was 0.57 times. As a result of increased finance cost and low earnings recorded in
year under review interest cover declined to 1.52 times as compared to 2.30 times in year 2018.

Profitability Ratios

Gross profit ratio has decreased by 4.23% as compared to the previous year 2018 primarily due to
increase in input cost mainly affected by Pak Rupee depreciation of 11.32% and decrease in sales due to
prevailing economic conditions in the country. Net profit to sales ratio also decreased by 34.69% as
compared to 2018 mainly due to increased finance cost. As a result return on equity and capital employed
also decreased by 36.79% and 40.02% against the previous year

Activity/ Turnover Ratios

Inventory days decreased in current year by 2 days as compared to previous year 2018 and receivable
days improved by 3 days due to efficient operating cycle management. The overall operating cycle of the
Company improved by 7 days as compared to the previous year 2018.

Investment / Market ratios

As a result of decrease in earnings in current year, EPS has also decreased to 1.68 as compared to 2.67 in
the previous year. Economic uncertainty on the political front resulted in an oscillate price trend exhibited
by the Company's share throughout the year. However, investor confidence is resuming in the light of
improved share price of Rs. 27.07 per share as at the close of 2019 in comparison with Rs. 24.90 at the
close of 2018 and fundamentals like price Earnings ratio which is 16.12 in 2019 as compare to 9.33 in
year 2018.