Ca le & Ele t i al Goods

I sight Pak Elektron Limited

P i e: Pk‘ . , Ta get P i e: Pk‘ . , Pote ial Upside: . %

AKD E uit ‘esea h / Pakista Ju e ,

Ali Asghar Poo a ala PAEL: Multiplie s o e i all shapes & fo s

I est e t A al st
ali.poonawala@akdsecuriies.net We i itiate o e age o Pak Elekt o Ltd PAEL PA ith a Bu ati g ha i g a De TP of
UAN: - - Ext: Pk‘ . /sh. ‘isi g o su e du a le spe di g p opagated apid u a izatio a d fa o a le
de og aphi s a e slated to a plif White Goods pu hases hile dist i utio fo used o e-
ial e e g CAPEX push po e e uip e t de a d. Both u de go ups i gs f o e isti g ut
KAT“ Code PAEL
u dis ipli ed i f ast u tu e a d o su e du a le o su ptio patte s ai tai i g a lo g-
Bloo e g Code PAEL.PA
te de a d s eet-spot fo PAEL. That said, e also highlight ediu -te o petiti e p es-
P i e Pk‘ .
su es i the applia e seg e t a d pu li -se to go e a e isks as eighi g o ea i gs.
G ou ded i these, stu d de a d is fo e asted ith a - g oss sales fo a d CAG‘ of . %
Ma ket Cap Pk‘ , s. ~ % du i g CY - A . Ho e e , passi g-o the high ost of di e tl i po ted ate ials
Ma ket Cap U“$ . % of total COG“ e ai s halle gi g i a e i o e t he e the u e is u de p es-
“ha es . su e, t a slati g i to CY - F a e age GM of . % s. . % du i g CY - A. ‘esulti g NPAT
g o th - fo a d CAG‘ of . % postu es fo e- ati g as the sto k u e tl t ades at a
M High Pk‘ . CY / F P/E of . / . a d PEG atio of ~ . . At u e t p i e le el, the sto k p o ides a
M Lo Pk‘ . upside of . %.
Bala e sheet e i al goi g stead : PAEL s aluatio set has fi g ou ds fo e- ati g as a o -
Y High Pk‘ . du i e e i o e t fo de a d e do s ala e sheet health, gua di g agai st s i gs i p ofita-
Y Lo Pk‘ . ilit a d o ki g apital. Catal sts i o su e applia e a e o du i e to ou g o th outlook
suppo ted high elati e a ket sha es. A follo -o , is the a ilit of PAEL to tape its de t u -
M A g Tu o e ' , . de . Fa i g a eake ed Pk‘ s. U“$ outlook, ou se siti it sho s that e e % i ease i lo g
Y A g Tu o e ' , . te Pk‘ dep e iatio , assu i g o l % of the ost is passed-o ou ase ase is % edu es
ea i gs ~ % o Pk‘ . /sh a d softe s g oss a gi s ~ ps f o ou ase ase. Additio -
all , s i gs i fai alue a d de t le els usi g a e age et de t to EBITDA i di ate that just a
M A g DT Value Pk‘ . da i ease i a ual a e age DIO a d D‘O edu es fai alue Pk‘~ /sh Pk‘ . , hile
M A g DT Value U“$ . o pe sati g fo the sa e th ough le e age aises et de t ~ % additio al o o i g of
Pk‘ . . Ma kedl , the o ki g apital le is a u ial sou e of st ess o aluatio s.
Y A g DT Value Pk‘ .
Multiplie s o e i all shapes a d fo s: P o i e e of e e t a ts a d i essa t e phasis
Y A g DT Value U“$ .
o i p o ed featu es/fu tio alit p o pt a shift e o d p i e- ased o petitio , p opagati g
sho te epla e e t les i the applia e spa e. De elop e ts ge a e fo a lega a d,
PAEL: Pri e Perfor a e su h as PAEL to le e age fo a ket sha e. E plo i g the ediu to lo g te outlook fo de-
M M M CYTD a d, e highlight ou ode ate ie o po e seg e t sales, o e t ati g o tepid a gi s,
A solute % - . - . - . - . edu ed p i i g po e i the e uip e t s usi ess. I the EPC seg e t, e take a o e ullish
‘el. I de % - . - . - . - . ie , asi g sales g o th assu ptio s o pla ed CAPEX up le a d pu li spe di g, o l afte
A solute Pk‘ - . - . - . - . CY F. Co se ue tl , e highlight i e se oo fo apa it additio s to dist i utio , esti at-
i g a pote tial ~ % i ease i the s ste s MVA et ee CY - F. Mo eo e , e ap a se ies
of e e ts o the ho izo , that ould ha e a ate ial i pa t, su h as the app o ed ut et to e
PAEL s. KSE- Perfor a e e e uted MYT CAPEX pla s, he e just the top-tie IE“CO, FE“CO a d LE“CO pla ould aise e-
10.0% te /dist i utio t a sfo e de a d . / . % p.a th ough to FY F.
0.0%
I est e t Pe spe ti e: Ou ullish thesis a o odates a ele ati g EPC i o e, ope ati g
-10.0%

-20.0%
ash flo s keepi g de t u de s a agea le hile hea elati e a ket sha es la gest pla e i
-30.0% p odu t seg e ts that a ou t fo o e tha ~ % of g oss sales sustai f ee- ash-flo g o th.
-40.0% Looki g at a a ge of egio al po e e uip e t a d household applia e a ufa tu e s, e li it
-50.0% the elati e o pa iso to s alle pee s he e PAEL looks att a ti e i te s of aluatio et i s
-60.0%
a d pa outs. E le ati of a a ufa tu i g o e i high-g o th seg e ts, high et o ki g
apital d ai a e age Pk‘ . p.a fo CY - F s. Pk‘ . i CY a d CAPEX outla s
-70.0%

-80.0%
Pk‘~ . p.a CY - F a e age , e essitate le e age D/E a e age ~ % o e CY - F . Ne -
Jan-18

Jun-18
Jun-17
Jul-17

Sep-17
Oct-17

Apr-18
Aug-17

Feb-18
Mar-18
Nov-17
Dec-17

May-18

e theless, pa out atios a e e pe ted to sustai at ~ %, u de pi i g att a ti e di ide d ield

KSE100 Index PAEL
CY / F D/Y of . / . % . With a FCFF ased TP of Pk‘ . /sh, -Y‘ fo a d ea i gs CAG‘ of
“ou e: AKD ‘esea h & P“X
. %, the sto k offe s ~ % upside f o u e t p i e le el. Bu !

I po ta t Dis losu e: I po ta t dis losu es i ludi g i est e t a ki g elaio ships a d a al st e ii aio at e d of this epo t. AKD “e u ii es does a d seeks to do usi ess ith o pa ies o e ed i
its esea h epo ts. As a esult, i esto s should e a a e that the i a ha e a o li t of i te est that ould afe t the o je i it of the epo t. I esto s should o side this epo t as o l a si gle fa to i
aki g thei i est e t de isio .

AKD Securities Limited
Fi d AKD esea h o Bloo eg
TREC Holder & Registered Broker
AKD“<GO> , i st all. o
Pakistan Stock Exchange
a d ‘eute s K o ledge
REP-108
E ha ge
Cop ight© AKD “e u iies Li ited. All ights ese ed. The i fo aio p o ided o this do u e t is ot i te ded fo
dist i uio to, o use , a pe so o e it i a ju isdi io o ou t he e su h dist i uio o use ould e o t a
to la o egulaio o hi h ould su je t AKD “e u iies o its ailiates to a egist aio e ui e e t ithi su h
ju isdi io o ou t . Neithe the i fo aio , o a opi io o tai ed i this do u e t o situtes a soli itaio o ofe
AKD “e u iies o its ailiates to u o sell a se u iies o p o ide a i est e t ad i e o se i e. AKD “e u iies does
ot a a t the a u a of the i fo aio p o ided he ei .

.akdse u iies. et

Wh Bu PAEL?
Posii e de a d d a i s i o -
su e applia e seg e t a e o -
du i e to g o th. A follo -o f o
sustai ed topli e g o th is the a il-
it of PAEL to tape do its de t
u de .
Health ash lo s keep de t u -
de s a agea le ith Cash Co
seg e ts la gest pla e i p odu t
seg e ts totali g ~ % of g oss
sales sustai f ee- ash-lo
g o th.
NPAT g o th - fo a d CAG‘ of
. % postu es fo e- ai g ith
the sto k t adi g at a CY / F P/E
of . / . a d PEG aio of ~ . .
At u e t p i e, upside of % is
i plied.
PAEL timeline of operational highlights
“ou e: Co pa ‘epo ts a d AKD ‘esea h
I sight - Pak Elekt o Ltd.
Ba kg ou d: The “aigol G oup
“aigol G oup has a lo g histo of su essful fa il u usi ess e tu es p edai g i de-
pe de e, i iiai g o e e i the e l fo ed Pakista f o Kohi oo Te ile Mills i
. The g oup has di e siied i to sot o odiies, he i als, s thei i es, e gi ee -
i g a d i a ial se i es. The g oup o ed to esta lish the U ited Ba k Li ited UBL i
, hile othe e te p ises i luded U ited Che i als, Kohi oo ‘a o , Kohi oo E gi-
ee i g & I se i ides. Du i g the Go e e t of Pakista s Naio alizaio p og a , PAEL
as a ui ed the “aigol G oup i , o the e ge of losu e. Fo ed i , PAEL
as esta lished u de a te h i al ag ee e t ith AEG Ge a to a ufa tu e t a sfo -
e s, s it hgea s a d ele t i oto s. Post-a uisiio of o t olli g i te est the “aigol
g oup, PAEL e pa ded p odu io i to ef ige ato s, deep f eeze s a d ai o diio -
e s, e te i g i to u e ous te h i al ag ee e ts ith o pa ies i ludi g Fujitsu, ABB
a d Ca ie . Follo i g o , the t o disi t usi ess li es ha e o t i uted e e e l to
the o i ed o pa s topli e, hile ei g e posed to g o th f o isi g o su e du-
a le spe d a d po e i f ast u tu e de elop e t, efe i el ushio i g agai st ad e se
d a i s i eithe se to .
PAEL—Geographic Footprint
 I sight - Pak Elekt o Ltd.

GM, EBITDA & NM Ma gi p oile PAEL: I est e t Case

35.0% Ou BUY all a o odates stu d EPC i o e, ope ai g ash lo s keepi g de t u -
30.0%
de s a agea le hile hea elai e a ket sha es la gest pla e i p odu t seg e ts
that a ou t fo o e tha ~ % of g oss sales sustai f ee- ash-lo g o th. Looki g
25.0%
at a a ge of egio al po e e uip e t a d household applia e a ufa tu e s, e
20.0% li it the elai e o pa iso to sa e size pee s he e PAEL looks at a i e i te s of
aluaio et i s a d pa outs. E le ai of a a ufa tu i g o e i high-g o th
15.0%
seg e ts, high et o ki g apital d ai a e age Pk‘ . p.a fo CY - F s.
10.0% Pk‘ . i CY a d CAPEX outla s Pk‘~ . p.a CY - F a e age e essitate
le e age D/E a e age . % o e CY - F . Ne e theless, pa out aios a e e pe ted to
sustai at ~ %, u de pi i g at a i e di ide d ield CY / F D/Y of . / . % . With
5.0%
CY15A

CY16A

CY17A

CY18F

CY19F

CY20F

CY21F

CY22F

a FCFF ased TP of Pk‘ . /sh, -Y‘ fo a d ea i gs CAG‘ of . %, the sto k ofe s

Gross Margin EBITDA Margin Net Profit Margin
~ % upside.
“ou e: PAEL CY ‘esult P e ie : Based o ou esi ates, e e pe t PAEL to epo t NPAT of
Pk‘ . EP“:Pk‘ . a ki g a tepid late i g of - . %YoY, led : g oss sales
g o th of . %YoY ade up of . / . %YoY ise i po e /applia e seg e t sales,
a gi dete io aio - GM do to . % s. . % i CY ith Pk‘ de aluaio fu the
eake i g of ~ . % assu ed fo CY E, losi g at Pk‘ /U“$ de- aili g i po ted ate-
ials p i es a d highe efe i e ta ate of ~ . %, as ta edits fo e uit hea
CAPEX Pk‘ . aised th ough ight issued du i g CY su side. O the ala e sheet
side, e fo esee a eio i i te est ea i g lo g te lia iliies, i di ated D/E a d D/A
aios fo CY E at . / . % s. . / . % i CY . Lo e ‘OE e sues ‘OE of . %
fo CY E s. . % i CY A e - e aluaio su plus . Mo eo e , the DuPo t a al sis e-
t ee CY F s CY A poi ts to a aised sales tu o e a d highe e uit uliplie , hile
a sote et a gi . % fo CY E s. . % fo CY li its ‘OE to . % s. . % fo
CY . Ou sot outlook o CY E ea i gs is tai ted the elai el slo QCY ea i gs
ead NPAT of Pk do %YoY aki g the seaso al a ia ilit of ea i gs e t al
to ou eak outlook. E te al isks, a d dela ed/defe ed po e se to spe d fo the ea
a e to e a i o u p, leadi g to CY E NPAT g o th of ~ %.

ROE by Du-pont Components (LHS) and ROIC vs. WACC (RHS)

700.0% 30.0% 13.5%
25.0% 13.0%
600.0%
20.0% 12.5%
500.0%
15.0%
12.0%
400.0% 10.0%
11.5%
300.0% 5.0%
11.0%
0.0%
200.0% 10.5%
-5.0%
100.0% 10.0%
-10.0%
0.0% -15.0% 9.5%
CY11A
CY12A
CY13A
CY14A
CY15A
CY16A
CY17A
CY18F
CY19F
CY20F
CY21F
CY22F

9.0%
2017A
2015A

2016A

2018F

2019F

2020F

2021F

2022F

Sales Turnover X Equity Multiplier X

NM % ROE (ex-Rs) ROIC WACC

“ou e: PAEL & AKD ‘esea h

TP “e sii it to Beta & G o th
“to k Beta Valuaio s: Usi g a DCF ased FCFE aluaio odel, e plo i g a . / . % ost of e -
uit / ost of de t WACC sta ds at . % a d te i al ea of CY F te i al g o th of
- . . . . . . .
. % , e a i e at a De ' TP of Pk‘ . /sha e, ofe i g a upside of % f o u e t
i al G o th ‘ate

% p i e le els. Ou ullish i est e t h pothesis is su sta iated : at a i e P/E a d P/

B uliples of . / . a d . / . fo CY / F , Net “ales/Net i o e g o th e-
% t ee CY - F e pe ted to follo a CAG‘ of . / . % sig if i g sig ii a t g o th
pote ial, i p o ed ash lo a d i est e t outlook fo the o pa ith Y‘ fo e-
%
asted a e age a ual CAPEX of Pk‘ . , ai ed at addi g e p odu ts o e gagi g i
e pa sio s, BM‘ a i it a d M&A. A al zi g the i pa t of a ied assu pio s o alua-
Te

%
io s, e u se sii it a al sis i o po ai g a ious eta a d te i al g o th ate as-
% su pio s.
“ou e: AKD ‘esea h
 I sight - Pak Elekt o Ltd.

Relative Valuation Table with Asia Emerging & MENA Peers

Na e MktCap U“$ EP“ G o th YoY P/E ‘OE % ‘OA % EV Di Yield %

“OCIETE L'ACCUMULATEU‘ TUNI“ . - .

VOLTAMP ENE‘GY “AOG
PAYTON INDU“TI‘E“ LTD
“AUDI CABLE CO
MIDDLE EA“T “PECIALI)ED CABL
PAK ELEKT‘ON LTD
OMAN CABLE“ INDU“T‘Y
GULF CABLE & ELECT‘ICAL IND
ELECT‘ICAL INDU“T‘IE“ CO
KANG YONG ELECT‘IC PUB CO
HUALI INDU“T‘IE“ CO LTD-A
ANHUI JULONG T‘AN“MI““ION -A
HA‘BIN JIU)HOU ELECT‘IC CO-A
)HEJIANG TH‘EE “TA‘“ NEW MAT
JIANG“HAN OUPAI DOO‘ INDU“-A
“HANDONG WEIDA MACHINE‘Y -A
DEA GENE‘AL AVIATION HOLDI-A
XIAMEN ‘&T PLUMBING TECHNO-A
)HEJIANG YOUPON INTEG‘ATED-A
CG POWE‘ AND INDU“T‘IAL “OLU
)HENJIANG DONGFANG ELECT‘I-A
CECEP ENVI‘N P‘OTECTION EQUI
“HANKA‘A BUILDING P‘ODUCT“ L
)HEJIANG AI“HIDA ELECT‘IC-A
PANA“ONIC MANUFACTU‘ING MALA
. .
. .
. - -
. -
. .
. .
. .
. .
. - - .
. .
. .
. .
. -
. .
. .
. , - - -
. .
. - .
. - -
. .
. -
. .
. .
. .
“ou e: Bloo eg

I te aio al Pee o pa iso : Looki g at i te aio al pla e s i the o su e du a les

spa e, e atego ize the as Pu e-Pla applia e a ufa tu e s, du a le goods a ufa -
tu e s ith s e gies a d di e siied o glo e ates. E e though ost of these o pa ies
a e geog aphi all dispe sed ith u e ous a ufa tu i g fa iliies a d glo all o pei-
i e sou i g p a i es, fo o pa ai e pu poses e ha e deli eated thei p odu t seg-
e ts i to household applia es, o su e ele t o i s a d othe usi ess li es, hi h
i lude EPC se i es, o suli g se i es, se i o du to s, a d o po e ts a o gst oth-
e s. Adjusi g thei a ket p i es to U“$, e a see that di e siied pla e s a e alued at a
p e iu to pu e pla applia e o pa ies. Despite the sa e, o fu da e tal d i e s of
p oita ilit , EBITDA a d pa outs, PAEL is pla ed ell a o e la ge egio al pla e s.
 I sight - Pak Elekt o Ltd.

U i ue e posu e to po e o
T op i a usi ess atego ies p e ail, ith dife i g usi ess a d o peii e d a i s,
the a e Busi ess to Co su e B C seg e t, hi h i lude s all applia es, hite
goods, household goods, a d Busi ess to Busi ess B B seg e t ate i g to i dust ial
a d o e ial usto e s i ludi g the pu li se to , he e o e ial sale of applia -
es, po e dist i uio a d t a s issio e uip e t a e ajo usi ess li es. Both seg-
e ts ha e dife e t d a i s, o peii e fo es a d ta get audie es ith a o pa -
i g u i g eha io .

PAEL product offerings by segment

“ou e: Co pa ‘epo ts, We site a d AKD ‘esea h

 I sight - Pak Elekt o Ltd.

Appliances Segment — Porter’s Five Forces

Co peii e ‘i al Ba gai i g Po e of usto e s

 Lo al applia e a ufa tu e s e ai f ag e ted, ith ost
ofe i g lo a gi , lo ualit , s all applia es a d li ited
a ge of hite goods
 P i e ased o peiio has do i ated a ket d a i s,
hile latest featu es, a a ies a d a d alue a e i eas-
i gl i pa i g o peiio
 Li ited u e of ualit lo al a ufa tu e s O ie t, Da -
la e, Haie selli g at sig ii a t dis ou t to i po ts
 Fo applia es, i put ost i eases la gel f o FX, ate ials
ost a d ta es a e passed o to o su e s
 I po ted applia es e ai hea il ta ed a d a e p ese t i
u a a eas, he eas lo al pla e s ith deale s a d dist i u-
to s pe et ate i to u al a kets

Ba gai i g Po e of supplie s Th eat of su situtes

 ‘a ate ials of hi h sili o a d oppe ake up the la gest  High o soles e e applia es a e ei g epla e o e f e-
sha e a e i po ted th ough fo a d ooki g, ith p i es uot- ue tl , a ki g a shit i o su e t e ds
ed o i te aio al e ha ges  Lau hi g updated a ia ts to ate to o su e de a ds is
 Nu e ous selle s e ist fo ate ials, hile so e deg ee of esse ial, ase i poi t ei g the ollout a d o su e adop-
a gai i g po e a e e e ted fo eig supplie s ith io of e e g ei ie t i e te te h olog
ho PAEL has e e uted te h i al ag ee e ts

Th eat f o e e t a ts
 The i po t a ket applia es a d po e e uip e t e ai s
ope to e e t a ts, he e p i e poi ts, featu es a d a d
alue a e i po ta t dife e iai g fa to s
 A elik s e e t a uisiio of Da la e a ket leade i e-
f ige ato s , aises o peii e p essu es
 La ge s ale CAPEX fo p odu io , o siste t i est e t i
deale a d etaile et o ks a e ostl , dete i g e t a ts

Household durable bifurcation Product innovations to spur replacement demand

  
  
La ge Household Ma hi es Po ta le/“e i-Po ta le Mo ile Pho es,

  
‘ef ige ato s/F eeze s Household Ma hi es Ta lets

  
“plit/La ge ACs Toaste s TV, LCD, LED

  
Washi g Ma hi es Food P o esso s ‘adios

 
Kit he sto e & O e s Cofee Ma hi es Co pute s

 
Ele t i Heate s Va uu
“e i g Ma hi es Io s

“ou e: Xe i Glo al a d AKD ‘esea h

 I sight - Pak Elekt o Ltd.

Appliances Segment — SWOT Analysis

“t e gths Weak esses

 De a d fo o su e du a les is o the upt e d, a e tuated  I po ted i puts / % of applia e/po e e uip e t p i e
fa o a le a o fa to s i u osts f o olaile Pk‘ o e e ts a d o odit p i -
 Co su e o ide e is o a li , isi g steadil si e CY , es, passed th ough to applia e o su e s
he eas i he e t de a d g o th despite ea s of high i la-  Addiio al e t a ts to the i dust , pa i ula l those ith
io a d Pk‘ dep e iaio pe sists due to Pakista s fa o a le esta lished a ds, fo eig p ese e a d te h i al e pe ise
de og aphi s, g o i g iddle lass a d ele t ii aio a pull do p oits

Oppo tu iies Th eats

 E po t sales ha e e ai ed a possi le sou e of i o e,  Ma gi al p ope sit of de a d a ies g eatl et ee o -
he e the e o al of geopolii al te sio s a fu the a ess su e st ata, u a s. u al, so io-e o o i lass, fa il size
to eigh o i g ou t ies a d de og aphi s


“ta ilit o the a o f o t a e i peded oil p i e
“hiti g o su e tastes, ith a g eate elia e o highe
sho ks, dete io ai g u e t a ou t o app e iaio of the
ualit ofe i gs ith e featu es i e te te h olog , lo
g ee a k
oltage o p esso s gi es ise to o -p i e o peiio
 A i lu of i po ts, pa i ula l f o Chi a o lds la gest
 Ad e t of e- o e e has ofe ed oppo tu iies fo ate i g e po te of applia es , u de a f ee t ade ag ee e t
to u al de a d fo o su e du a les ith o etail p ese e u e tl ei g egoiated fo es lo e p i e poi ts of lo al
ofe i gs

UPSTREAM DOWNSTREAM

O igi al E uip e t Ma ufa tu e O igi al B a d Ma ufa tu e

O igi al Desig Ma ufa tu e

Full -I teg ated Ma ufa tu e

“ou e: Xe i Glo al a d AKD ‘esea h

PAEL Appliance product gross/division sale contributions and material COGS split
100%
80.0%
90%
70.0%
80%
60.0%
70%
50.0%
60%
40.0%
50%
30.0%
40%
20.0%
30%
10.0% 20%
0.0% 10%
Split A.C

Microwave

Others
Refrgerator

Freezers

0%
Others
Split A.C

Microwave
Freezers
Refrgerator

%age of Division Gross Sales

%age of Total Gross Sales
CY13 CY14 CY15 CY16 CY17

“ou e: Co pa ‘epo t a d AKD ‘esea h

 I sight - Pak Elekt o Ltd.

Applia es: Co su e du a le de a d set to li

“plit et ee do esti a d i po ted a ufa tu e s, Pakista s applia e a ket is
poised to e efit f o : health o st u tio a ti it atu i g o su e du a le de-
a d fo housi g a d e te p ise sales a d elati el o tai ed i flatio outlook f eei g
up allet size fo dis etio a spe di g. “hifti g o su e tastes a d u i g eha io
e ou age o petiti e i al ased o a d uildi g, p odu t ualit a d afte sales
se i es athe tha p i e alo e he e u hi de ed u a izatio a d health de og aphi
p ofile outh ulge fo the de a d ase. F o a o petiti e f a e, e look at the
at h of o peti g pla e s th ough thei usi ess i teg atio a d usi ess e ti als, o -
e ti g o i te sif i g o petitio i easi g i te sit of Chi ese a ds asse li g
lo all as da pe e s to ou fo e asts. I the ase of PAEL, e ap histo i al i dust
g o th i i dust size a d PAEL s u it sales o e e ts, a ki g high- o e tu a d
ash o s. To that e d, e highlight li itatio s i posed agg essi e dis ou ti g i peak
seaso dis ou ts at . % fo CY , a o pa i g a a t e pe ses a d elo the
li e osts %YoY ise i a a t e pe ses fo CY that eed to ool-off o atu e
fo us to fu the upg ade ou ase.
Ma oe o o i s udge disposa le i o es: With FY - F CPI e pe ted to a e age . %
s. FY - a e age of . %, e elie e the o flue e of si gle-digit i flatio a d a ge
ou d oil p i es Bloo e g a al st o se sus pegs B e t ude to a e age U“$ / l till
FY F lea e oo fo highe dis etio a spe di g, i ou ie . That said, the size of the
a e age households o su e disposa le spe di g o o su e du a les e ai s li ited,
he e e elie e eak ess o the e te al f o t Pk‘ dep e iati g . % CYTD a d pe sis-
te tl high ost of ele t i it a d to so e e te t s a t a aila ilit a su due de a d
o e the ediu te . Ne e theless, e elie e u a izatio a d de og aphi p opella ts,
oupled ith possi le alle iatio of ke po e se to st u tu al oes sustai a le solutio s
to i ula de t st ai s, lo ost of ele t i it li iti g o e ha gs o o su e ta iff as
lo e ost oal akes ase load sustai de a d fo applia es. I this a kd op, PAEL s
a d a d p odu t offe i gs is p oje ted to deli e a elati el health Y‘ fo a d g oss
sales/u it sales CAG‘ of . / . %, fo the seg e t.

Healthy demographics support demand over long term Urbanization to push consumer durable demand

240 000 26%

Total Population by Age Segment (000)

220 000 250,000 50%

Periodic Segment Growth (%)

200 000 24%

45%
180 000
22% 200,000 40%
Total Annual Population (000)

160 000
140 000 20% 35%

% Urbanization
120 000 150,000 30%
100 000 18%
25%
80 000
16%
60 000 100,000 20%
40 000 14% 15%
20 000
0 12% 50,000 10%
2005 2010 2015 2020F 2025F 5%

- 0%
0-14 15-24
1950
1953
1956
1959
1962
1965
1968
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
2013
2016
2019
2022
2025

25-34 35-44
45-54 55-64 Pakistan Total Annual Population
65+ 35-44 Segment Periodic Growth Pakistan - Urban Population
45-54 Segment Periodic Growth Pakistan - Rate of Urbanization (%)RHS

“ou e: UNDE“ Wo ld Populaio P ospe ts , UNDP Wo ld U a izaio P ospe ts , AKD ‘esea h

U a izatio d i i g o su e du a le spe d: We look at a a ge of data poi ts illust at-

i g o su e du a le spe di g i the ou t . Pa si g th ough the i-a ual Household
I teg ated E o o i “u e of , households a oss the ou t fo FY latest
sho s that a e age household o su ptio e pe ditu e stood at Pk‘ , / o th fo the
fi st ua tile st et hi g to Pk‘ , / o th a d a o e fo the fifth ua tile, a ki g total
a e age spe di g of Pk‘ , / o th. Additio all , u a households ~ % of households
su e ed e eed u al household spe di g ~ % a oss all ua tiles, ith total a e age
household spe di g of Pk‘ , / o th, %/ % highe u al/total households spe di g
 I sight - Pak Elekt o Ltd.

si e FY a d % fo total u al household spe di g . Whe o pa ed agai st o thl

o su ptio pu pose, fu ishi g fo household e uip e t a d ai te a e akes up
. / . / . % of a ual u a / u al/total a e age household o su ptio s.
. / . / . % fo FY . Additio all , the epo t highlights e of food, health, t a spo t, hous-
i g a d utilities, dis etio a e pe ditu es ade up . / . % of u a /total a e age
o thl e pe se. I the a kd op of a a ele ati g u a izatio s i g isi g to %
fo % u e tl a o di g to UNDP Wo ld U a izatio P ospe ts to ake
Ka a hi the th a d late th la gest it populatio i the o ld i a d , e
elie e fe tile atal sts fo applia e de a d p e ail.

Urbanization upswing expected to persist, sizeable in the region

Pakistan,
57% Southern Asia, 52.5%
Lower-middle-income 60%
countries, 57.4%

50%

India, 50.3%

% Urbanization
40%
Vietnam, 31.1%

30%

20%

10%

0%
1998

2020

2042
1950
1952
1954
1956
1958
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996

2000
2002
2004
2006
2008
2010
2012
2014
2016
2018

2022
2024
2026
2028
2030
2032
2034
2036
2038
2040

2044
2046
2048
2050
“ou e: UNDP Wo ld U a izaio P ospe ts , AKD ‘esea h

‘eside tial de a d e ai s uo a t as ele t ifi atio ates ise: Health housi g a ket
e ai s a leadi g i di ato of applia e sales he e fi st ti e pu hases a e di e tl li ked
to eside tial o st u tio a d uildi g a ti it . Thus, the e e t ad e t of housi g s he es
a d pla ed eside tial olo ies, espe iall i se o d tie ities e.g. Multa , Faisala ad,
“ialkot & Guj a ala a e e pe ted to i ease pe et atio . We e ai se e el li ited i
p oje tio s fo u o st ai ed ele t i it de a d g o th due to poo ualit , u ti el a d
u e ifia le data sets, li iti g a holisti de a d appi g. E e so, u al de a d pe et a-
tio o ti ues to push i dust g o th ith ~ % of de a d still li ked to u al households
he e pe et atio ates fo ef ige ato s ~ % a d ai o ditio e s ~ % is still ell e-
lo the glo al a e age / % fo ef ige ato /ai o ditio e s . A p o i e t o o alit
et ee high pe et atio ates fo hite goods e ai s pe apita ele t i it o su ptio ,
Urban Households discretionary spending growth Monthly average discretionary spending > 30%

100%
Portion of total monthly average household

90%
27.43 31.61 Urban-FY16
80%
70%
60%
expenditure (%)

50%
Urban-FY14
40%
72.57 68.39
30%
20% 0% 20% 40% 60% 80% 100%
10%
0% Portion of monthly average urban household
Total-FY14 Total-FY16 expenditure (%)

Discretionary Spending
Food, Housing, Health & Transport
Furnishing, Household Equipment & Maintenance Furnishing, Household Equipment & Maintenance
Food, Housing, Health & Transport Discretionary Spending

“ou e: “BP HIE“ , AKD ‘esea h

 I sight - Pak Elekt o Ltd.

he e a d la ge, highe pe apita o su ptio of po e t a slated to highe pe et a-

tio ates. This is illust ated i the s atte plots see elo , he e Pakista s elati el e-
g essi e po e suppl s e a io . MWH/pe so o su ptio fo sta ds the lo -
est a o gst o pa a le egio s a d so is elati el u de pe et ated i te s of ef ige a-
to s a d ACs. Additio all , a e age epla e e t life fo household applia es i Pakista
e ai et ee - s, e ai i g highe tha epla e e t life fo applia es i de el-
oped a kets a e age epla e e t life of s i the U“ . E ou agi gl , epla e e t de-
a d has ee o se ed to st e gthe e e tl o the a k of e desig e go o i s,
g eate e e g effi ie pa ti ula l the ad e t of heape i e te te h olog a d i -
p o ed p i a fu tio s ette o t ols, o e to a ds s a t o t ols .

Refrigerator (LHS) and AC (RHS) penetration vs. electrification in regions

14.0 14.0
Electricity Consumption per capita (MwH/person)

Electricity Consumption per capita (MwH/person)

No th A e i a
12.0 12.0 No th A e i a

10.0
10.0
Western Europe
8.0
Australia New 8.0 Western Europe Australia New
Zealand & Zealand & Japan
6.0 Japan
Africa, Middle
China 6.0
East & Eastern
4.0 Europe Africa, Middle China
4.0 East & Eastern
Southeast Asia Latin America Europe
2.0 & China Southeast Asia
India
& China
2.0
Pakistan India Latin America
-
0%

20%

40%

60%

80%

100%

120%
Pakistan
-
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
Product Penetration - Refrigerators % of households Product Penetration - Air Conditioners % of households

“ou e: PAEL a d AKD ‘esea h

Pote tial fo su sta tial u a a ket g o th: We see a s eet spot i e pe ted de a d
g o th fo household applia es e a ati g f o u a households suppo ted highe
tha a e age i o e le els, ele t ifi atio , e plo e t le els a d o thl e pe ditu e. Fo
the pu poses of appi g this lu ati e a ket seg e t e d a o a ious datasets “BP
HIE“ , PB“ Ce sus , PAEL a age e t dis ussio . “eg egati g households i u -
a a d u al a eas f o the Ce sus esults, e aise the th eshold fo pote tial us-
to e s isolati g those i the highest o su ptio e pe ditu e ui tile Pk‘ , /
Pk‘ , / o th i a e age u a / u al o su ptio fo th ui tile , efo e e o i g
u e tl u ea hed households fo ACs a d ‘ef ige ato s pe et atio atios of ~ %/~ %
fo ‘ef ige ato s/ACs . Di idi g these u tou hed households ith u e t a ket ua tit
size AC/‘ef ige ato sales of , / , , u its e a i e at a pote tial u tapped
a ket . / . u e t a ual AC/‘ef ige ato sales, ith u a households aki g up
~ % of this pote tial fo a ket e pa sio .

Potential for unreached households is huge in urban areas for AC & fridge
Households No. U a ‘u al Total Households
Total Households PB“ Ce sus , , , , , ,
Top E pe ditu e Qui ile , , , , , ,
AC Households U pe et ated , , , , , ,
‘ef ige ato Households U pe et ated , , , , ,
U -pe et ated household de a d as a ual a ket ua it sales , i es
AC . . .
‘ef ige ato . . .
“u . .
“ou e: PB“, “BP, PAEL & AKD ‘esea h

Co petitio is ulti-p o ged: Deli eati g the applia e se to i to upst ea , do -

st ea ope atio s , lo al o petitio sta ds as a hete oge eous field ith ost i po ted
pla e s li ited to ei g o igi al a d a ufa tu es “a su g, Ele t olu , LG . Haie ,
Cha gho g ‘u a, ‘&I Ele t i al Applia es Ke ood a d Ho age a d )huhai G ee DWP
G oup ope ate as o igi al e uip e t a d a d a ufa tu e s ith the o eptio aspe t
of usi ess ope atio s taki g pla e i thei pa e t o pa ies. Lastl , a fe o pletel i dig-
e ous full i teg ated a ufa tu e s su h as PAEL, O ie t a d Da la e a e p ese t ith
 I sight - Pak Elekt o Ltd.

thei o do st ea outlets, afte sales e te s a d etail p ese e a oss the ou t . O

that ote, Eu o o ito has de la ed Pakista s Kit he applia e a ket o e of th ee ajo
oppo tu it a kets he e o e tha % of ho es ha e a kit he a d a e e o di g the
thi d highest ate of household kit he pe et atio . I this ega d, the epo t highlights the
u i ue p i e s. alue p opositio att a ti g Chi ese a ufa tu e s he e Haie has al ead
s ept up a sig ifi a t sha e ef ige ato sha e of % ith othe o petito s i easi gl
pu sui g g o th outside of Chi ese a kets.

Not all competition is created equal

Household Co su e
Co pa Applia es Ele t o i s Othe s P oile
Whi lpool - -
White goods pu e pla e s ith high ho e appli-
Ele t olu - -
a e a ket sha es i egio al a kets
“EB “A - -
A elik
Vai Co p
Du a le goods a ufa tu e s ith s e gies i
Haie Qi dao
elated usi ess seg e ts
Bajaj ele t o i s -
Pak Elekt o
LG
Mitsu ishi Ele t o i s Di e siied o glo e ates ope ai g i se e al
Haie Ele t o i - dife e t i dust ies
Toshi a
“ou e: PAEL & Co pa ‘epo t

CCI Sub Index for household durables, construction, income & expenditure
65 50
60 CCI Sub-Index Constituents
55 45
50
45 40
40
35 35
30
25 30
20
Jan-13
Jan-12

Jan-14

Jan-17

Jan-18
May-12

Sep-14
Jan-15

Jan-16
Sep-12

May-13
Sep-13

May-14

May-15
Sep-15

May-16
Sep-16

May-17
Sep-17

25
Jan-12

Sep-12
Jan-13
May-13
Sep-13
Jan-14

Sep-14
Jan-15

Sep-15
Jan-16

Sep-16
Jan-17

Sep-17
Jan-18
May-12

May-14

May-15

May-16

May-17
HH income in the next year compared to previous year
6MMVA for HH income Next Year Next 6M for purchasing durable household items
Current time to purchase durable household items vs. previous 6M 6MMVA for purchasing durable household items
6MMVA for purchase of household durable goods vs. prev 6M Current times for purchase/construction of new house
6MMVA for purchase/contruction of new house

“ou e: “BP CCI a d AKD ‘esea h

Co su e o fide e a d oge t de og aphi s suppo t p i i g po e : Pakista s sig ifi-

a t outh ulge % of total populatio is elo the age of ea s hile % is et ee
the ages of a d ea s a o di g to UNDP fo s the de a d ase. We elie e pe sis-
te tl high i- o thl , “BP-IBA Co su e Co fide e I de CCI eadi gs a e agi g .
fo eight eadi gs post CY a d up a ds t e ds fo su -i di es of the CCI pa ti ula l
those pe tai i g to household du a le e pe ditu es a d i o e e pe tatio s a sustai
up a ds. A i p o ed se u it e i o e t oupled ith ohesi e i f ast u tu e de elop-
e ts u de the a it of CPEC p oje ts a d u h- eeded politi al sta ilit apa t f o p e-
ele tio tu ult should keep CCI sta le i the ea te . O e the lo g u , health de-
og aphi s a e e pe ted to sustai o su e e pe tatio s a d e ou age g eate dis e-
tio a spe di g o household du a le goods, allo i g lo all asse led applia e a u-
fa tu e s a g eate deg ee of p i i g po e .
Fight fo i d-sha e : Positi e de elop e ts i do st ea ope atio s of the applia e
se to i lude the de elop e t of alte ati es to etail ha els, he e e- o e e plat-
fo s ha e g o i p o i e e. Da az.pk e e tl a ui ed A t Fi a ial – ost alua-
le fi te h o pa , ho eshoppi g.pk a d ishoppi g.pk a e a fe of the ajo o li e e-
taile s selli g a full a ge of household goods i ludi g la ge applia es a d hite goods.
Adoptio of digital pa e t solutio s, g eate s a tpho e pe et atio a d the ad e t of
 I sight - Pak Elekt o Ltd.

‘ef ige ato a ket sha e CY high speed o ile i te et e o d u a e te s is e pe ted to suppo t e- o e ei -
WAVES dust to a hie e sales of U“$ , a o di g to the Pakista Tele o u i a-
tio s Autho it . E e so, t aditio al etail ha els ith egio al deale s a d i di idual
2%
HAIER
12%
etaile s e ai s the p i a ode of applia e sales, he e the g o th i oad ast
DAWLANCE edia has a ele ated pull ased a keti g st ategies, i.e. TV o e ials a d p odu t
32%
pla e e ts. Additio all , push ased deale i e ti es a d o issio s e ai p o i-
ORIENT
20%
e t i do st ea sales of applia es ith a gi s a d o - o eta i e ti es a e
o side ed as ital i aisi g sales of p odu ts to the e d o su e . O a side ote, o se -
a le t e ds f o a elated al eit sig ifi a tl g eate alue passe ge auto o ile seg-
OTHERS -
Including e t he e e e t a ia ts ith updated featu es ette ileage, i te io e ellish-
Imported
Products
2% PEL
e ts that allo s fo sig ifi a t p i e hikes ~ % fo e Cultus s. Old to e a epted
32%
usto e s ithout deflati g de a d.
“ou e: PAEL ‘ef ige ato s o ti ue to e a ash o : The lo al ef ige ato a ket ossed Pk‘
a k i CY , holdi g at Pk‘ . fo CY ith the i dust e pe ie i g Y‘ histo i al
Deep f eeze a ket sha e CY
CAG‘ of . %, aki g up the la gest sha e of the do esti household hite goods a ket.
OTHERS - Including
A a al sis of p i e poi ts a d p odu ts o offe e eal that do esti a ufa tu e s o -
Imported Products
3%
pete i the Pk‘ , - , p i e poi t ith a ket sha e leade s ei g Da la e %,
Varioline
26% PAEL % a d O ie t % . Additio all , the a ket fo ef ige ato s e ai highl o -
petiti e ith lo al a ufa tu e s fo usi g o i p o i g aestheti s e.g. glass doo odels
a d i t odu i g additio al featu es i e te te h olog , oppe tu i g . Co petito s ha e
WAVES
28%
shifted to o peti g o a d alue, ta geti g oth pull ased ad e tisi g a d p o o-
tio al a paig s, hile el i g o t ade dis ou ts ~ . % of selli g p i e fo PAEL i CY
DAWLANCE
11%
s. CY - a e age of . % to push p odu ts effe ti el . O a si ila ote a d follo i g
PEL
HAIER
21% si ila d a i s, the Deep f eeze a ket is alued at Pk‘ . fo CY Y‘ CAG‘ of
11% . % a d follo s si ila d a i s, ith elati el g eate de a d e a ati g f o u al
e te s, a d o solidated a ket sha es.
“ou e: PAEL
Competitive pricing map for Refrigerators & Deep Freezers
- - - - - - - A o e No. of
‘ef ige ato s , , , , , , , , , Lisi gs
WAVE“
Ke fo o pa ai e p i e ap HAIE‘
“haded PEL
Des ipio
A ea DAWLANCE
% o o e of lisi gs p i e O ie t
falli g i a ge
Hita hi
% o o e of lisi g p i e
falli g i a ge “a su g
% o o e of lisi gs p i e LG
falli g i a ge “ou e: Da az.pk, Ho eshoppi g.pk, Ishoppi g.pk & AKD ‘esea h

“plit AC a ket is a sta : Ai o ditio e s AC ha e u de go e a g eat deal of de elop-

e t, shifti g f o Wi do AC to “plit AC u its ith outdoo ooli g u its. The fastest
AC Ma ket “ha e CY g o i g seg e t i household applia es %YoY g o th i CY , Y‘ CAG‘ of . %,
the a ket fo AC s is alued at Pk‘ . , aki g it the se o d la gest a ket i the
Changhong OTHERS - Including household hite goods spa e ith the ost f ag e ted o petiti e la ds ape i the ap-
4% Imported Products
2% plia e atego , ei g led )huhai G ee G oup s lo al dist i uto , the DWP G oup
DWP
(GREE +
ORIENT % , O ie t % a d Haie % . Apa t f o the o petiti e i al p e ale t i the
household se to at la ge pla i g its ole i the AC atego as ell, de a d fo AC sales is
19%
ECOSTAR)
21%
highl seaso al. “u e o ths of Ap il-Jul a e the peak seaso fo AC sales hile i te
pe iod O t-Ja a e slo seaso s. Wo ki g apital eeds a e tied up a o di gl he e
R&I HAIER fu ds a e tied up i the fo of i e to i the pe iod p e edi g su e o ths. Lo al
(Kenwood
+
19%
o petito s a e agg essi el o peti g i the Pk‘ , - , p i e poi t ith u e -
Homage)
12% ous a ia ts o offe . To that e d, the p e ale e of peak seaso dis ou ti g has e oded
PEL DAWLANCE
10% 13% p i i g po e of pla e s i this atego hile e d of seaso dis ou ti g is a o o
easu e to d a do i e to le els, f eei g up spa e i o ki g apital to a ufa -
“ou e: PAEL tu e fo the o i g seaso .
But head i ds e ai p o i e t: Pa ti ula sou es of da pe i g applia e de a d
e ai : o petiti e fo es gai i g g ou d lea i g little oo fo a gi a etio ,
p i i g i dis ipli e ith dis ou ts o u e t sto k pa ti ula l i the su e u i g sea-
so depleti g a gi s a d e e t a ts i the u e tl o ded ass a ket seg e t
 I sight - Pak Elekt o Ltd.

Air conditioner comparative price offering map

a o e No. of
Ai o diio e s* , - , - , - , - , - , - , , Lisi gs
O ie t
Haie
Da la e
PEL
G ee
Cha gHo g ‘u a
“a su g
Ke ood
*o l i ludes Wall Mou t “plit Ai Co diio e “ou e: Da az.pk, Ho eshoppi g.pk, Ishoppi g.pk & AKD ‘esea h

a fu the the fight fo a ket sha e as p i i g poi ts e ai o ded. Apa t f o the

oade p oje t isks of pla ed po e se to i est e ts a d asso iated dela s i t a s-
issio i f ast u tu e, a lo g te t aje to of highe o su e ele t i it ta iffs uo ed
de t pa e ts i luded i CPP o po e ts fo po e a d t a s issio p oje ts a
dis ou age spe di g o applia es. I eased G“T o lo all a ufa tu ed applia es o
additio al i di e t ta atio easu es ta geti g the se to ‘D o CKD kits fo AC s ould e
the ope i g shot a also p i e out iddle to lo i o e households. Lastl , the pote tial
fo dis upti e te h ologi al ha ges p e ale e of ai oole s, ide a epta e of a ell-
pho e i stead of a ashi g a hi e i u al a eas is a halle ge o e ge s p o oti g
o solidatio a o gst lo al pla e s a ot e uled out.
G o th s. atu it : A al zi g g o th i this se to f o the le s of PAEL, e ap pote -
tial g o th spots fo PAEL. Ju taposi g ua tities sold the a ufa tu e ith ide i -
dust size g o th et ee CY - A. Based o the sa e, a d o fi ed : highe
dis ou ti g i g o th seg e ts ACs i pa ti ula p e aili g du i g peak seaso u i g,
ise i a a t e pe ses a d elo the li e e pe ses isi g to at h agg essi e sales
d a i s, e la if the high ost of gai i g a ket sha e i these seg e ts. Ba ked ou
se ti e t su e see g e o o page , e elie e ef ige ato sales to e the ed o k
fo applia e se to p ofita ilit g o th he e the se to s o t i utio to a gi s is fo e-
asted to e ai stag a t o e the ediu te .
Ou esti ates a e up eat i the ediu te : Citi g a fe tile de a d e i o e t le d-
i g suppo t to applia e seg e t g o th, e i o po ate a sig ifi a tl i p o ed offtake
s e a io fo PAEL. At the fo ef o t of ou ullish sta e is Ai Co ditio e sales Y‘ fo -
a d ua tit sales/g oss sales e e ue CAG‘ of . / . % o t i uti g ~ % o

Total industry growth vs. gross sales growth for PAEL Appliances (CY14-17A)

200%
3YR product wise gross sales for PAEL

180%
Deep Freezer
160%

140%

120%

100% Microwave Ovens

80%
Airconditioner
60%

40%

20% Refrigerator
0%
0.0% 20.0% 40.0% 60.0% 80.0% 100.0% 120.0% 140.0%

3YR Historical CAGR for Segment

“ou e: PAEL Ma age e t a d AKD ‘esea h

 I sight - Pak Elekt o Ltd.

a e age to g oss sales f o the seg e t. Fo ef ige ato s/deep f eeze s/ i o a e o e

& othe atego ies the e pe ted Y‘ ua tit sales CAG‘ ests at . / . / . %, allo -
i g the se to s o i ed ua tit sales CAG‘ et ee CY - F to ea h . %. I o po-
ati g the o st ai ed e e ise of p i i g po e PAEL, e a i e at a applia e se to
Y‘ sales g o th CAG‘ of . % s. . % fo CY - A , allo i g the se to s EBITDA
a gi s to a e age ~ % et ee CY - F s.CY - A a e age %. B a d la ge,
PAEL s futu e is e pe ted to e steeped i stead a ket sha e a d a d alue, e pe ted
to follo th ough i to the applia e seg e t o t i uti g ~ % i g oss sales du i g the
e t fi e ea s, agai st ~ % du i g CY - A. E t i to additio al p odu t seg e ts ai
oole s, s all applia es, LED et a ot e uled out hile BM‘ a ti ities a d e pa sio s
e ai additio al upsides to ou esti ates see o pa se tio .

Discounts as % of gross sales for appliance segment

30.0% 28.41% 27.99% 28.24%
26.24%
25.0%

19.42%
20.0%

15.0%

10.0%
6.32%
5.0%

0.0%
CY15 CY16 CY17 CY18E CY19F CY20F

“ou e: Co pa ‘epo ts a d AKD ‘esea h

Gross Sales Split for Appliance Division by product

Refrigerator Split A.C Deep Freezer Microwave Ovens & Others

2% 1% 3% 5% 4% 5% 5%
5% 9% 8%
2% 9% 10% 10% 11%
5% 8%
19% 18% 18% 18%

91%
83% 82%
67% 67% 67% 66%

2014A 2015A 2016A 2017A 2018F 2019F 2020F

“ou e: Co pa ‘epo ts a d AKD ‘esea h

 I sight - Pak Elekt o Ltd.

“a ple size t pe a d it
“u e : Pe eptio s a d Ke Bu i g Fa to s fo Applia es
12
T ia gulati g ou u e s agai st p e aili g a ket o ditio s i the applia es a d hite
10 goods se to , e ha e o du ted a ualitati e su e he e ou oho t as li ited to hole-
8 sale s/deale s, etaile s a d e- o e e fi s selli g household applia es i the u a e -
te s of Ka a hi a d Laho e i ludi g ajo applia e selli g luste s i the t o ai ities. The
6
u i g eha io of o su e s as a al zed ith ke selli g fa to s lassified u de pe ei ed
4 a d alue, te h olog /desig a d afte sales se i es ith espo de ts a ki g ea h i o -
2 de of i po ta e. Co se ue tl , e isolate ke a ia les f o ope e ded uestio s p o i g
additio al ha a te isti s su h as, afte -sales se i es, ai te a e, usage pe iod a d a a -
t pe iod of p odu ts a d fa to s i flue i g the epla e e t le fo household applia es.
0
Retailers Wholeseller E-commerce
Karachi Lahore Ho e e , d a a ks of ou stud e ai the a se e of u al espo de ts that u e tl
ake up the ajo it of PAEL s de a d ase a d etaile s a d deale s ha e i he e t iases as
pa ti ula a ufa tu e s a offe g eate dis ou ts a d a gi s to the fo pushi g thei
p odu ts o e othe s. He e, e app oa hed espo de ts ithout poi ti g out hat o pa
O e all a d pe epio a k—
‘ef ige ato s o a ufa tu e e e e losel stud i g i.e. PAEL i o de to a oid a positi e ias. Yet, the
sa e a ha e fa to ed i to the espo ses as ou p o i g a d se o da li e of uestio i g
90% ould ha e alluded to the sa e.
80%
70%
Pe ei ed B a d Value seg e t: Fo ef ige ato s/deep f eeze s, Da la e e ai s at the
60% top he e the ajo it of espo de ts highlighted: a aila ilit of desig s, olo s a d a ia ts
50% as p odu t li es e ai la gel u ha ged, st o g pull fa to as a keti g a d essagi g
40% the o pa e ai o siste t a d despite p odu tio hi ups esulti g f o the e e t
30% a uisitio of ope atio s A elik, e a age e t has o ti ued ith the stu d uild, op-
20% pe f a e a d i t odu tio of e featu es fo e.g, H-zo e i se t epelle t od , UV lights, lo
10%
i te sit oto . PAEL as i se o d pla e he e espo de ts poi ted to the la k of o siste
0%
Dawlance PEL Haier Orient i desig a d olo s as a ajo sou e of o e as the OEM a uptl e o ed o a e ded
1st 2nd 3rd ajo desig s pla i g etaile s a d usto e s i a i d. The slot fo thi d positio as take
O ei t a d Haie he e the fo e has gai ed a ket sha e due to ta geted a di g, st o g
etail ha els a d ui k adoptio of e desig s a d featu es. I the AC a ket, e e t Chi-
ese o igi lo al asse le G ee has gai ed top positio he e its p odu ts a e o side ed high
ualit a d good alue fo o e . PAEL o es i at se o d pla e ith etaile s highlighti g sup-
B a d pe epio — st ‘a k fo ACs
pl hai a d dist i utio o e s du i g the su e selli g seaso as a oad lo k, pulli g
Orient, Kenwood, a k PAEL f o the top spot.
3% 3%
Ke u i g fa to : Pull- ased ass a keti g a d a d essagi g e ai ed top of i d fo
usto e s of hite goods a ufa tu ed lo all as alk-i usto e s had uilt st o g o epts
a ou d the ajo a ds a d e e guided these i u i g de isio s. The p olife atio of
Haier,
15%
oad ast edia, pa ti ula l tele isio ha els a d TVCs as highlighted as d i i g u i g
se ti e t he e e featu es a d ad e tised dis ou ts d o e usto e s to etaile s i sea h
Gree, of a gai s. Te h olog /desig took se o d pla e he e i t odu tio of i e te te h olog a d
80%
its a ilit to edu e e u i g e e g ha ges sti sig ifi a t u i g o e tu . Mai te a e,
afte sales se i es a d a a t e e ot highlighted as sig ifi a t fo es i d i i g u i g de i-
sio o a sta dalo e asis. “ho te lead ti es fo e odels a d i eased o petitio ased
o featu es a e o se ed to ha e a positi e i pa t o edu i g epla e e t les.
Co lusio s & o se atio s: P o i e e of e e t a ts O ie t, G ee i esta lishi g a foot-
B a d pe epio — d ‘a k fo ACs hold a d o peti g ith olde a ds u de pi the i easi gl o petiti e d a i s of the
do esti applia es spa e. It a also e said that p i e is o lo ge the o l ke o su e
pu hase de isio as a ia le featu es, te h olog a d ualit is gai i g i p o i e e. Follo -
i g the sa e logi a d i light of shifti g t e ds highlighted, e elie e the field is ide ope fo
Gree, 18%
Dawlance,
18% lega a ds ith high ualit offe i gs, st o g a d alue a d upg aded featu es i ludi g
PAEL to d asti all i p o e a ket sha e. Based o these o se atio s, e asse t that o su -
e s a e ope to shifti g to e a ds, s a ed e featu es a d positi e e ie s/ o d of
PEL, 28%
Haier, 25% outh. These eha io s a e aided dis ou ts leadi g up to the su e u i g seaso as o -
su e s e-e te the a ket o i itiate e-pu hase of hite goods less f e ue tl , o di g
a kets efo e the su e . Additio all , as the de a d ase fo o su e du a les deepe s,
Orient,
8% e highlight a i easi g a a e ess i o su e s of diffe e t featu es a d dis ou ts a o gst
Kenwood, o petito s. P o i g fu the i to these t e ds a d a ked the i easi g shift fo adopti g
5%
effi ie - ased featu es i household applia es, e asse t that epla e e t le u e tl at
“ou e: AKD ‘esea h Household Applia e
- s is sho te i g, pa ti ula l a o gst u a o su e s. These o se atio s a e a d
B a d Pe epio a d Qualit “u e
la ge positi e fo PAEL he e the o pa has ade head a i alle iati g suppl hai sho t-
ages, keepi g sto ks ead fo the su e u i g seaso a d i t odu i g e featu es. As u -
i g eha io a d o petiti e di e sio s of the applia es se to o ti ues to shift, e ai i g
o petiti e is goi g to e a tough t i k to pull off fo all pla e s.
 I sight - Pak Elekt o Ltd.

‘isks:
 I po t hea o su ptio a e fleeti g: Co i ued eak ess o the e te al
f o t, pa i ula l th ough a dep e iai g Pk‘ a lead to highe p i e le els fo appli-
a es. Addiio all , Pk‘ eak ess e poses disposa le i o es to head i ds as highe
fuel osts e sue.
 I flatio p o e o su ptio de li e: Whe at hed ith d asti , sustai ed oil p i e
hikes, a o se i g u e t a ou t pi tu e ould de ail o su e o ide e, alte i g
u i g ha its of households a d da pe i g de a d fo o su e du a les.
 Ele t i it suppl a d osts: The e e g hai e ai s g ossl u de -go e ed, he e
i f ast u tu e i est e ts ha e ee lopsided, ith poo ualit a d dife e iated
out o es. Based o ou o ki g, as po e ta ifs a e ot e pe ted to de li e despite
a o e di e siied po e i as t a s issio ha ges a d addiio al le ies a e e -
pe ted to keep po e ta ifs high.
 Pk‘ de aluatio s: Pa i ula l i the fa e of toughe i g o peiio ith lo all as-
se led o peito s seeki g to ake i oads i to the a ket ofe i g agg essi e
dis ou ts ould eigh sig ii a tl o p i i g po e
 Othe o petiti e p essu es: Wide de elop e ts i etail a kets, top-ie supe
sto es a d ele t o i s spe ii etaile s pushi g spe ii p odu ts ould u de p oita-
ilit as PAEL ould ha e to e pa d its etail ope aio s o a o pa o ed o pa-
ope ated odel, aisi g elo the li e e pe ses.
 Li uidit isk: T ou les ith edito s, a d a a ge e ts fo de t o e sio to e uit
shel ed o pletel ith loa s o o e ted to lo g-te a a ge e ts ha e the
added isk of dep essi g sto k pe fo a e.
 I sight - Pak Elekt o Ltd.

Power Equipment Segment — Porter’s Five Forces

Co peii e ‘i al
Ba gai i g Po e of usto e s
 Te de i g is the p i a p o ess fo aggi g la ge p oje ts i
pu li WAPDA, DI“COs, NTDC a d p i ate i te aio al, lo al  Pu li se to spe di g do i ates po e p oje ts he e ope /
p oje ts p oje t te de i g is used he e Pu li P o u e e t Autho it
 Co peiio o p oje ts ith fo eig EPC o t a to s is li ited, egulaio s a e e fo ed a d p i e is do i a t i hoosi g
hile lo al p oje ts la gel fa o ost efe i e lo al a ufa tu - supplie s
e s th ough te de i g  I te aio al p oje ts fu ded ulilate al age ies also
 I te aio al le de s ha e st i ge t “OPs fo p oje t te de i g i ite ids a d ha e ope te de i g ith st i ge t sta da ds
ith spe ii aio s fo ea h p oje t losel adhe ed to
Ba gai i g Po e of supplie s Th eat of su situtes
 “ili o e, t a sfo e oils a d sheet etal ake up ~ % of  Negligi le as t a sfo e s, s it hgea s, s it hes a d ete s
sales alue i di ai g elia e o i po ted a ate ials a d a e a e essit fo T&D i f ast u tu e

e posu e to e te al i di ato s i s a i g i put osts Te h ologi al t e ds alte i g the T&D e uip e t i dust i
 Te h i al ag ee e ts ith a ious i te aio al i dust ial the ediu te i lude High Voltage DC t a s issio
a ufa tu e s M, Dupo t, ABB allo fo k o ledge sha i g HVDC et o ks a d Ad a ed Mete i g AMI
a d i t odu io of e te h ologies

Th eat f o e e t a ts
 Custo s dut o i po t of Ma hi e a d e uip e t ea t
fo po e t a s issio , “.NO i the ith s hedule is stated
et ee - % keepi g i po ts ia le
 Lo ost a ufa tu e s ith glo al suppl hai s a e hesita t
to o pete o p i e, he e lo al a ufa tu e s a e a le to
sa e o la o a d t a spo t osts

Tender flow process for power equipment sales

P e-P epa aio of

Te de i itaio s “upplie s ‘espo d E aluaio & “ele io
p oje t e ui e e ts

• Biddi g do u e ts a d p o e- • Ope te de s eleased th ough • “upplie s eei g e ui e e ts a e • Bids a e ope ed

du e a e set out
• ‘e uest fo te de is fo ulated
e phasizi g p oje t e ui e e ts
• Te h i al a d e uip e t spe ii a-
io a e ag eed upo
• Co plete set of iddi g do u e ts
a e pu lished a d ade a aila le
• Legal a d egulato app o als a e
se u ed
p i t, oad ast ediu s
• Pu lished a d updated se to p o-
u e e ts put o PP‘A e site a d
fo eig age p o u e e t po tals
• Ea est o e is e ui ed to e
paid fo e ei i g iddi g do u-
e ts, ith egiste ed supplie s
gi e o essio s
• Last date of te de su issio
p o i e tl e io ed
gi e detailed iddi g do u
• Assessi g detailed do
supplie s o pile detailed
issio s, ith suppo i g do
e ts • “t i t go e a e sta da ds a e
u e ts, follo ed ith te h i al e pe ts s u-
id su - i izi g id su issio s
u e ts • I so e ases supplie s a e
app oa hed fo fu the la ii aio s/
details
• ‘esult of e aluaio p o ess a e
pu lished ith su essful supplie s
ei g oiied

“ou e: PP‘A, ADB, WB & AKD ‘esea h

 I sight - Pak Elekt o Ltd.

Power Equipment Segment — SWOT Analysis

“t e gths Weak esses

 E e uio of pla ed i est e ts i Po e i f ast u tu e
CPEC a d othe ise a e posii e
 Ma ufa tu e s ith esta lished e o d of e e ui g la ge p o-
je ts, eei g te h i al e ui e e ts a d ith a e phasis
o p i e a e at a ad a tage
 “ ste ai ope aio al isks i Pakista s po e se to ake
pu li te de i g, i el o pleio a d e eipt of pa e ts
h o i isk fa to s i this usi ess st ea
 I te aio al p oje ts a e ostl uoted i U“$, hedgi g FX
isks, hile lo al p oje ts a e uoted i Pk‘, ith - o th lag
et ee te de ope i g a d deli e dates

Oppo tu iies Th eats

 Addiio s to ge e aio apa it oupled ith la ge s ale  “lo do i po e se to i est e t, CAPEX pla s fo DI“COs
t a s issio a d dist i uio p oje ts la gel o du ted faili g to ate ialize o shiti g pu li se to p io iies a
GoP fu io a ies p o ide lee a fo topli e g o th p ese t ajo i pedi e ts
 P i ate housi g p oje ts a d eside ial s he es fo the  Co i uous uild up of po e se to de t a d fu the dete io-
ed o k of housi g o st u io a i it , allo i g fo p i ate aio i o po ate go e a e DI“CO a d GENCO le el ould
io al a kets fo po e e uip e t pa al ze de isio aki g o T&D i est e ts

Materials costs as % of Net Sales Value CY13-17 PAEL—Product-wise Gross Revenue share

100%

90% 40.0%

80% 35.0%

70% 30.0%

60% 25.0%

50% 20.0%

40% 15.0%

30% 10.0%
20% 5.0%
10% 0.0%

EPC
Trans former

Switch Gear
Power Transformer
Energy Meter

0%
EPC
Trans former

Energy Meter

Switch Gear
Power Transformer

%age of Division Gross Sales %age of Total Gross Sales

CY13 CY14 CY15 CY16 CY17

“ou e: PAEL a d AKD ‘esea h

Layout of power transmission & distribution system in Pakistan

Po e “tatio /IPP “tep-up T a sfo e NTDC “tep-do t a sfo e PAEL Po e

Di isio “e i e
Ma ket
Co o Deli e

E d-Use T a sfo e s/PMT“ Feede s Dist i utio Co pa ies

“ou e: A shad & O Kell , AKD ‘esea h

 I sight - Pak Elekt o Ltd.

Po e : Pigg a ki g o po e spe di g
De a d fo po e e uip e t, e gi ee i g, p o u e e t a d o st u tio EPC se i es
a d ete i g i f ast u tu e AMI o stitute the B B usi ess seg e t. He e the pu li
se to e ai s p o i e t, follo ed fo eig do o a d le di g age ies. Ai i g to
e e ute o p ehe si e po e se to efo s, the PML-N go e e t set out to e ti -
guish Pakista s pe siste t po e defi its hi h a e et to e o e o e , MW a e -
age a ual sho tfall FY - A . Thus, the ole of pu li se to i f ast u tu e spe di g is a
p o i e t d i e of de a d fo po e e uip e t he e a ual udgeted Pu li “e to
De elop e t P og a o t i utio s to the se to peaked at Pk‘ fo FY A. A oth-
P“DP allo aio s to pu li po e e atego of B B i est e ts o igi ate i the fo of fo eig e o o i loa s a d assis-
se to o ga izaio s/di isio s ta e spe di g hi h ake up ~ % of esti ated p oje t osts of pla ed p oje ts
180,000 Pk‘ . of total esti ated ost of Pk‘ . as of FY udget esti ates. P oje ts
160,000
o fo eig assista e a d pu li se to fu di g follo the ope te de i g p o ess ostl
ith si gle stage, o e e elope he e p oje t o po e ts/lots a e ope fo ualified
Annual Revised Expenditures (PkR Mn)

140,000

120,000

100,000 idde s to su it p i e o petiti e uotatio s. “t i t sta da ds a e adhe ed to he e

80,000
Pu li P o u e e t ‘egulatio s PP‘A ules a d p oje t spe ifi te h i al, e uip e t
a d i stallatio e ui e e ts a e ke to se u i g o de s. “ho asi g the st ai s of a
60,000

40,000

20,000 o e u de ed T&D s ste , o elatio s ith e e g o su ptio seg e ts e eal

-
i e se oo fo aug e ti g T&D a pe age. The adoptio of ode uildi g sta d-
FY2000

FY2012
FY2001
FY2002
FY2003
FY2004
FY2005
FY2006
FY2007
FY2008
FY2009
FY2010
FY2011

FY2013
FY2014
FY2015
FY2016
FY2017
FY2018
FY2019B

Water & Power (Water Resources, Energy for all)

a ds, ele ated uildi g a d o st u tio a ti it high ises, ulti-pu pose uildi gs a e
WAPDA (Power) Corporation p opella ts to g eate Lo Voltage LV po e dist i utio e uip e t de a d.

“ou e: MoF, MoPD&‘ & AKD ‘esea h Domestic power demand, generation and deficit
30,000 7,000

6,000
Total Generation/Consumption (MW)

25,000
5,000

20,000 4,000

Deficit (MW)
3,000
15,000
2,000

10,000 1,000

-
5,000
(1,000)

- (2,000)
FY03

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16

FY17
Supply Demand Deficit

“ou e: NEP‘A & AKD ‘esea h

Po e “e to Ba kg ou d: Hea il egulated, the Po e “e to i Pakista is a stud i

pu li se to issteps i o siste t poli ies, i a ilit to a age pa e ts a d lu ati e
ge e atio i e ti es ha essed ope atio all sou d p i ate IPPs I depe de t Po e
P oje ts . “i e i depe de e, the se to has ee go e ed the Mi ist of Wate &
Pay e ts & re eipts i the po er
Po e ith Wate a d Po e De elop e t Autho it WAPDA i ha ge of ge e atio
syste
fo usi g o h del a d dist i utio . I a id to aise egulato sta da ds, i ple e t i -
pa tial i depe de t poli ies to e efit o su e s i the passage of the ‘egulatio of
Ge e atio , T a s issio a d Dist i utio of Ele t i Po e A t, , esta lished the Na-
tio al Ele t i Po e ‘egulato Autho it NEP‘A , as a i depe de t egulato od .
Du i g this pe iod, the ole of the Natio al T a s issio & Dispat h Co pa NTDC , Paki-
sta Ele t i Po e Co pa PEPCO , pu li se to Ge e atio Co pa ies GENCOs as
e la ged, ha di g o e poli do ai s p e iousl o e ed WAPDA. Thus, the do esti
po e spa e has de eloped i to a si gle u e odel ith the GoP a d a ious fu tio a -
ies ope ati g as egio al o opolies, suffe i g f o i effi ie a d la k of o po ate go -
e a e, ot to e tio the pe siste t a d s ste i uild-up of e ei a les pe eati g the
po e hai . Fo these easo s, g o th i po e e uip e t i dust has failed to ate ial-
ize as ed tape, a se e of p o edu e a d la p oto ols ha e stifled u h eeded de elop-
e t, eha ilitatio a d upg adatio spe di g po e se to e tities.
“ou e: Valasai et al ,
‘egulato “t u tu e: ‘egulatio s go e i g i dust ial e uip e t a ufa tu i g o e
the sa e usto s dut egi e fo i po t of po e t a sfo e s % , LV e uip e t
 I sight - Pak Elekt o Ltd.

% a de eg ete s % . A additio al la e of egulatio is i t odu ed due to the

ell-e t e hed p ese e of pu li se to e tities i the po e se to he e the Natio al
T a s issio & Dispat h Co pa NTDC , Wate & Po e De elop e t Autho it
WAPDA a d te Dist i utio Co pa ies a d K-Ele t i i ite te de s th ough a egulated
p o ess go e ed u de Pu li P o u e e t ‘egulatio s . A othe su -field of po e
e uip e t p oje ts a e take up p oje ts u de take ultilate al age ies he e
i te atio al p oje t a age e t spe ifi atio s a e appli a le a d te de i g is used. Cost
is the p i a asis fo ei g su essful i the iddi g p o ess hile i te atio all fu ded
p oje ts a e ostl uoted i U“$ hedgi g FX isks , he eas lo al pu li se to p oje ts
a e paid i Pakista i ‘upees.

O e u de ed t a s issio s ste de a ds o e haul: Both NEP‘A s last pu lished “tate

of The I dust epo t a d Pe fo a e E aluatio epo t of DI“COs a d KEL o ti ue to
e p ess o e o e ou ti g T&D losses Pk‘ . fo FY , su sta da d olle tio s
Pk‘ i losses fo FY , load sheddi g a d ualit of suppl pa a ete s. To ote, the
Autho it itself p o lai s se ious e o s i self- epo ted data pa ti ula l ualit of suppl
et i s su h as “AIFI, “AIDI, fault ates, hou s of load shed DI“COs a d KEL, alli g the
fa f o fa tual positio s . He e, e illust ate T&D losses a e age of ~ % fo FY - A
appi g the th ee highest loss PE“CO/HE“CO/KEL ith a ual T&D losses a e agi g
. / . / . % a d th ee lo est loss DI“COs IE“CO/FE“CO/GEPCO a e agi g losses of
. / . / . % a sig of ou ti g te h i al ul e a ilities e ou agi g theft. ‘e o e ies
depi t a si ila at oph th oughout ele t i al utilities as the Y‘ a e age olle tio s a oss
the te DI“COs a ou ts to %, ea i g that ~ % of u its se t out th ough the dist i u-
tio et o k atio all do ot t a slate i to e e ues fo these utilities. We o u ith
the autho it o e a shee eed of p ope data ase s ste ega di g e o di g of i te up-
tio s a d its du atio hi h e ai a u ial li k i easu i g suppl ualit , easu i g
de a d a d e e tuall appi g out a ohe e t o e haul st ateg .

DISCOs performance by CY16 T&D losses (LHS) and recoveries (RHS)

40.00 100

PESCO, 90
35.00 33.80 80
70
30.00 HESCO, 60
26.50
T&D Losses (%)

50
25.00 K-Electric,
22.24 40

20.00 30
20
15.00 10
GEPCO,
10.58 0
PESCO

FESCO

LESCO

MEPCO

QESCO

SEPCO
IESCO

GEPCO

HESCO

K-Electric
10.00
FESC
IESCO, 9.10 O,
5.00 10.20
FY12 FY13 FY14 FY15 FY16 FY12 FY13 FY14 FY15 FY16

“ou e: NEP‘A & AKD ‘esea h

Pu li se to is the iggest ga e i to : I this a kd op, po e e uip e t is e pe ted

to e efit f o GoP efo s a d pla ed i est e ts as the de a d fo MV, LV dist i u-
tio e uip e t follo s the upt e d i ge e atio . Budget allo atio s fo the po e se to
ha e ee o a upt e d du i g the outgoi g go e e t s te i offi e, although dis-
u se e ts ha e lagged p o isio ed a ou ts. Fo FY E, the GoP dis u sed Pk‘ .
i fu ds fo the Po e Di isio of hi h ~Pk‘ as fo eig assista e , the highest
dis u se e t i t o de ades a d aki g up % of total atio al de elop e t outla to
fede al i ist ies as a pa t of the Fede al P“DP p og a . Looki g deepe i to dis u se e t
data, go e e t allo atio s i ludi g p o i ial spe di g a d CAPEX to WAPDA, GEN-
CO“, NTDCL & DI“COs the PEPCO s ste has ee g o i g at a st o g lip, hi h is e -
pe ted to pi k up i the e t go e e t. These outla s a e ta geted to e ha e t a s is-
sio et o k fu ds dis u sed to NTDC . I the a kd op of a ele ati g apa it additio s,
the pu li se to is e pe ted to e ai a la ge usto e fo po e e uip e t.

CPEC pa ks a po e ful pu h: O the a k of CPEC led i est e ts, the lio s sha e of hi h
has ee p o isio ed fo po e ge e atio i est e ts, e elie e ele ated i ou d FDI le els
 I sight - Pak Elekt o Ltd.

a e e pe ted to pe sist. A o di g to pu li l a aila le data sets e ha e o piled a o p e-

he si e list of ea l ha est po e p oje ts u de CPEC i itiati es. The e pe ted apa it addi-
tio of , MW ha e a o pletio date of e d CY ith ~ , MW i apa it additio s
ei g ade CY -e d. Apa t f o fo eig i esto s, ultilate al le di g age ies, de elop-
e t age ies a d fo eig assista e p oje ts also pla a p o i e t ole i po e i f ast u tu e
i est e ts. FDI i flo s fail to aptu e the e ti e ua tu of i est e ts i the spa e as ost
fo eig i flo s a e de t a a ge e ts hile ajo it of O&M/EPC o t a to s fo these p oje ts
e ai Chi ese ulti atio als. To that e d, the o siste t pi k-up i po e se to FDI i flo s
du i g the p e ious Go e e t s te u e is i efuta le, he e FY - A a e age a ual i flo s
g e to U“$ peaki g i FY A U“$ . hile e ai i g st o g th ough MFY
U“$ i flo . P og ess o i po ted oal pla ts i “i dh, e e a le e e g additio s a d
Tha oal i i g ope atio s a e fa i g i o dela s MW i p oje ts ha e e te ded dead-
li es to De . We elie e sustai a le lo ost of ge e atio is u ial i the lo g te alle ia-
FDI Flo s fro Chi a tio of i ula de t hi h a o l e do e th ough Tha oal p oje ts hi h a e e pe ted to
o t i ute a sig ifi a t sha e of the atio s ase load De .
1,400
1,284
1,204
1,200
1,064 Key CPEC project nearing completion
1,000
P oje t o issio ed Date CoD Capa it Net - MW Fuel
800 o l ope a-
696 Quaid e Aza “ola Pa k Aug “ola
io al
600
H d oChi a Da ood Po e Ltd Ap . Wi d
400 319 “a hal Wi d Fa Ap . Wi d
200
91
UEP Wi d Po e Pla t Ju Wi d
-
“ahi al Coal Fi ed Pla t Jul , I po ted oal
FY13

FY14

FY15

FY16

FY17

FY18TD

Po t Qasi Coal Pla t U it- No I po ted Coal

Po t Qasi Coal Pla t U it- Ma I po ted Coal
“ou e: “BP & AKD ‘esea h P oje ts i Pipeli e Date CoD Capa it Net - MW Fuel
Chi a Po e Hu Ge e aio Co U it - De I po ted Coal
E g o Po e ge Tha Ltd U it - De I po ted /Lo al oal the eate
“ou e: NEP‘A, Ne s epo ts & AKD ‘esea h

But pu li se to depe de e a ies isks: Go e e t odies a d o ga s o ti ue to

u i est e t pla s ital fo a o odati g highe ge e atio le els. Pla ed apa it
additio s to the g id e ui e CAPEX fo t a s issio i f ast u tu e, hi h e ai s held
a k i the p o ess of egulato app o als. Additio all , pu li se to p o u e e t e-
ai s i ed i illi it p a ti es ith a g o i g o e to i flue e the i depe de t p o ess of
p o u e e t. E tities also hold a k o aki g pa e ts, leadi g to uild up of e ei a-
les he e e u i g uildup of e ei a les ~Pk‘ o GHPL s ooks due f o PEPCO
s ste DI“COs a e a ajo hi d a e to e e uti g o t a ts. The GoP s p i atizatio pla s
a e e le ati of these o e s as the outgoi g Go e e t has ha ged its poli e-
ga di g p i atizatio due to shifti g politi al p essu es. A positi e t e d ou te i g soft
pu li se to spe di g is the e e ge e of p i ate housi g so ieties ith i depe de t dis-
t i utio et o ks a d ulk suppl ta iffs taki g the e essa i f ast u tu e spe di g out
of the DI“COs do ai a d t a sfe i g it to the p i ate se to . Bah ia To Ka a hi a d
DHA Isla a ad a e ajo housi g p oje ts i Ka a hi he e PAEL has al ead se u ed
Pk‘~ . i illi gs, a figu e that is e pe ted to t ead up a ds as additio al p oje ts o e
o li e. Housi g p oje ts i se o d tie ities Multa , Faisala ad, “ialkot, Na a shah offe
a lu ati e oppo tu it to i ease pe et atio as ell. Mo eo e , the e is oo to la d
EPC o t a ts f o the p i ate se to as i depe de t, depe da le dist i utio i f ast u -
tu e e ai s a p io it fo these p oje ts a d a e a ajo selli g poi t fo eal estate de el-
op e ts.
Field of o petito s is o ded: Apa t f o a ket sha e data of do esti o petito s
i ea h seg e t of po e dist i utio e uip e t, e e phasize u e ous othe i te a-
tio al a d lo al o petito s i ple e ti g a ious stages of T&D p oje ts a oss the ou -
t . Co peti g idde s i lude la ge o glo e ates ased i Chi a, Ko ea , Tu kish a d “ i
La ka ased fi s take pa t i p oje t te de i g ith a offe i g e d-to-e d tu ke
solutio s. Do esti o pa ies p i atel o ed a e also taki g pa t i te de s ith a
fo i g joi t e tu es ith fo eig pa t e s to e e ute o ple p oje ts ith a o -
po e ts. The Wo ld Ba k s Ease of Doi g Busi ess a ki g allo s fo a ufa tu i g a ti it
a oss atio s a d egio s to e e h a ked o a set of ke et i s. Fo a ief idea of
o st ai ts fa i g PAEL data fo Laho e is hose i a ufa tu i g po e dist i utio

Key regio al
Import time and cost
/ Land supply chain
Di s ta nce (ki l ometers )
Lea d ti me (da ys )
I sight - Pak Elekt o Ltd.
e uip e t f o i po ted o po e ts, e o pa e t o et i s ega di g dista e o -
e ed a d lead ti e e ui ed fo i po ts th ough la d suppl . Pakista s positio i these
et i s e ai s elo egio al pee s ut a o e lo e - iddle i o e e o o ies. We also
o pa e i dust ial ele t i it ta iffs he e e sta d as the se o d ost e pe si e afte “ i
La ka a d at U“ e t . /K H is ~ % o e e pe si e tha the egio al a e age.
Average industrial tariff of US Cent18.8/KwH highest in the region
25
20.1
20 18.8
17.75
15.7
15
12
10 9.2
5.8
5
Vietnam
India
Pakistan
China
Iran
Bangladesh
Sri Lanka
“ou e: EODB “u e , WB & AKD ‘esea h
Competing international and unlisted local firms in power equipment sector
Co pa Cou t of O igi A ea of E pe ise
T a sfo e s, EPC, O&M, E gi ee i g “olu-
etri s o road ased i port LTL Holdi gs “ i La ka
Lower io s
South middle
Pakistan Asia income Vietnam China India Thailand T a s issio li e, to e a d ha d a e a -
562 288 916 230 649 473 25
“A-‘A E e ji Tu ke ufa tu e , tu ke i ple e taio of su sta-
6 5 8 3 9 6 2 io , s it hes, a d dist i uio o t a i g
“ou e: WB Ele t i it ge e aio , t a s issio , dist i u-
No theast Chi a I te aio al Ele t i Po e Chi a
io e uip e t, p oje t EPC
Pla i g, p o u e e t, EPC & tu ke fo
Asso iated Te h ologies Pakista ‘e e a les, H del, “ola ge e aio , dist i-
uio a d e e g a age e t soluio s
Chi a Ele t i Co. LTD Chi a Po e t a sfo e s
“u e i g, EPC, a ufa tu i g of High olt-
L“ Net o ks - L“ Ca les & “ ste s Ko ea
age t a s issio li es, u de g ou d
“ie ua ele t i o., ltd. Chi a Ci uit eake s, o e to s, s it hgea s
Ci uit eake s, o e to s, s it hgea s,
“ha do g taikai dis o e to s o., ltd. Chi a
us isolato , pa els & ela s
Co st u io , EPC a d g id staio eha ilita-
T a s a k I te aio al P t Ltd Pakista
io , i ludi g JV ith Xia of Chi a
Ci uit eake s it hgea a ufa tu e , g id
Pi ggao g oup o. ltd. Chi a
staio e uip e t
High oltage s it hgea a ufa tu e , g id
Alsto suzhou high oltage s it hgea o. Chi a
staio e uip e t
LTL t a sfo e s p t. li ited Pakista PMT, T a sfo e
Tu ke , EPC o t a to fo HV t a s issio
No theast Chi a I te aio al Ele t i Po e Chi a
li es
Ni g o Liao ua Lighi g o, ltd Chi a Ma ufa tu e of poles, t a s issio li es
H osu g Co po aio Ko ea G id staio EPC,
Ne age a les p t li ited Pakista G id staio EPC,
A te he DYH Ele t i Co pa Chi a “ it hgea s a d g id staio e uip e t
High oltage a d e t a high oltage po e
Liao i g-Efa e ele t i al e uip e t o. ltd. JV
t a sfo e s, o ile su staio s a d EPC
Ci uit eake s it hgea a ufa tu e , g id
“ie ua ele t i o. ltd. Chi a
staio e uip e t
“outh hi a ele t i al ua zhou o. ltd. Chi a T a sfo es
“iddi ueso s E gi ee i g Pakista Ci uit eake s, isolato s
T a sfopo e I dust ies p t ltd. Pakista T a sfo e s
G id staio EPC, pa els, s it hgea s a d
“ie e s Pakista E gi ee i g o. ltd. Pakista
o po e t a ufa tu i g
I.H. Malik & Co. p t. ltd. Pakista Co st u io of po e t a sfo e a s
“ou e: ADB “u essful G&“ idde s list - fo p oje ts i Pakista a d AKD ‘esea h
 I sight - Pak Elekt o Ltd.

E eg ete s a ket sha e G o th e ai s a slo sto : Looki g at lo g te g o th t e ds i the po e e uip-

e t seg e t ju taposi g i dust seg e t CAG‘s ith G oss “ales CAG‘s fo PAEL, e
a i e at u da e g o th le els, la kluste seg e t sha es a d tepid histo i al sales
PEL
Others
15%
18% g o th elati e to seg e t g o th. The e e g ete seg e t has u de go e the g eatest
ECCORTS
g o th o e ha i g a Y‘ CAG‘ CY - A of . % follo ed dist i utio t a sfo e s
8%
at . %. “ it hgea seg e t has e ai ed la gel statio a o e the pe iod hile Po e
T a sfo e a ket has e eded a Y‘ histo i CAG‘ of . %. Bet ee the fou seg-
ACCURATE CREATIVE
e ts, a ket sha es i all, e ept Po e t a sfo e s is f ag e ted ith total pla e s i
9% 19%
Dist i utio T a sfo e s/E e g ete s/“ it hgea s a e supplied / / pla e s ith
the la gest a ket sha es of %/ %/ %, highlighti g i te se o petitio i these seg-
e ts. PAEL is o fi footi g to g o its sha e i these seg e t, he e despite seg e t
KBK MICROTECH
16%
g o th e ai i g uted, PAEL has u de go e seg e t- ise g oss sales g o th of
15%
%/ %/ % fo “ it hgea s/Dist. T a sfo e s/Po e T a sfo e s du i g CY - A.
Histo i g oss sales de li e of % i the E e g ete atego is e le ati of slo a-
“ou e: PAEL te ializatio of sales g o th i the se to , despite the u ge t eed fo upg adi g the do-
esti T&D i f ast u tu e.
“ it hgea a ket sha es
Rate of segment growth vs. gross sales for PAEL (CY15-17 CAGR)
PEM PAK
11% PEL 20%
25%

Switchgears
3YR Historical Gross Sales CAGR for PAEL

15%
Distribution
SCHENIDER
16% Transformers
10%

Power Transformers
SIEMENS
10% 5%

SIDIQ SONS 0%
FICO
20% -60.0% -50.0% -40.0% -30.0% -20.0% -10.0% 0.0% 10.0% 20.0%
18%

-5%

“ou e: PAEL
-10%

Energy Meters
“ it hgea a ket sha es -15%

3YR Historical CAGR for Segment -20%

Other
18%

“ou e: PAEL Ma age e t & AKD ‘esea h

PAN POWER
TRANSFOPOWER
40% Rate of segment growth vs. gross sales for PAEL (CY15-17 CAGR)
12%

Transformer Energy Meter Power Transformer

JF
INDUSTRIES
Switchgear Power Projects EPC
13%
ELMETEC
17%
8%
25% 21% 26% 27% 27% 26%
“ou e: PAEL 15%
14%
13% 15%
23% 17% 20% 24%
13% 6%
25% 8%
7% 10% 8%
12% 7% 7%
5% 9%
10%

45% 43% 40%

38% 35% 36% 32%

2014A 2015A 2016A 2017A 2018F 2019F 2020F

“ou e: PAEL Ma age e t & AKD ‘esea h

 I sight - Pak Elekt o Ltd.

“a gui e esti ates o Po e seg e t: We take a lo g-te ie o i p o ed po e

e uip e t de a d, pa ti ula l e o d CY F, he e the u t of pla ed apa it addi-
tio s is ade, a d e go e e t is fo ed pushi g spe di g p io ities. Ba ked the
sa e, fo PAEL e ha e assu ed total u it sales of po e e uip e t p odu ts to ea h a
CY - F fo a d CAG‘ of . % s. CY - A CAG‘ of . %. E e so, g o th of g oss
sales f o the po e e uip e t usi ess is fo e asted to g o at a Y‘ fo a d CAG‘ of
. % s. . % du i g CY - A. We elie e u de l i g g o th p opella ts should ki k-i
du i g CY F he e g oss sales g o th should e a ate f o e e g ete s Y‘ fo e ast-
ed CAG‘ at . % a d “ it hgea s . % CY - F CAG‘ , hile po e a d dist i utio
t a sfo e sales g o th should e ai elati el u da e . % Y‘ fo a d CAG‘ . Fu -
the upsides a ise i the fo of highe tha e pe ted spe di g o AMI a d uildi g t a s-
fo e apa ita e ou te i g the t e d of o e loaded g id statio s. I the EPC usi ess,
e fo e ast sustai ed g oss sales CAG‘ fo CY - F at . % s. . % fo CY - A .
Dete io atio i p i i g po e e ai s a da pe e to p ofita ilit po e e uip e t a ia-
le COG“ a gi s to a e age ~ % as ate ial osts ake up a la ge sha e of selli g p i es
a d a es alatio s a e a so ed the o pa to la d la ge pu li -se to p oje ts.
 I sight - Pak Elekt o Ltd.

‘isks
 Pk‘ de aluatio : Apa t f o a di e t elia e o i po ted o po e ts Lead, “heet
“teel, t a sfo e oil, i sulaio ate ials , la ge lo all p o u ed o po e ts ha e a
ate ials ele e t li ked to e te al e h a ks, fo hi h Pk‘ U“$ o e e ts a e
add-o osts, e e i g p essu e o a gi s. I the ase of pu li se to p oje ts ith-
out a e te al i a i g these p i i g is at hes ould lead to ate ial losses
e e though the lo ge te de pe iod a d i alizaio of osts a p o ide oo fo
iigai g these
 ‘eputatio al isk f o WB uli g: O Fe d , the Wo ld Ba k i a p ess elease
a ou es the de a e ts of PAEL f o iddi g i the age i a ed Ele t i it
Dist i uio a d T a s issio i p o e e t p oje ts i Pakista fo a du aio of
o ths. This as the esult of a setle e t ag ee e t et ee PAEL a d a lo al ep-
ese tai e i ol ed i p e-sei g of p i es fo i e WB i a es o t a ts, o si-
tui g ollusi e p a i es, a o di g to the WB p o u e e t guideli es. As e ha e
highlighted i the epo t, WB p oje ts o e the last i e ea s a ou t to ~ % of total
fo eig p oje t i o e fo eig p oje ts o e CY - A ade up ~ % of Po e seg-
e t G oss sales ut a e lu ped a d a g eatl aki g the o eta i pa t of the
de a e t to e lo e tha a eputaio al o e ha g.
 Chi ese a e o i g: With the ad e t of CPEC, ajo EPC o pa ies of Chi ese o igi
ha e sho to e o pei g o e agg essi e i pu li iddi g fo p oje t o po-
e ts. With di e siied suppl hai s a d u e ous elated p odu t seg e ts, e a e
goi g to e kee l o ito i g this spa e fo de elop e ts.
 ‘efo s a e ot a lo al pedig ee: Pakista has had a s a ed past he it o es to
pu li se to p oje ts, he e dela s, ualit o e s a d heighte ed ou te -pa t
isks ith the Go e e t ei g the ou te -pa t a e a pa t. E ou agi g t a k
e o d fo p i ate se to pa i ipa ts p ese ts a ight spot, he e e a ait sig ii-
a t go e a e efo s fo sustai a le lo g te de elop e t i the po e spa e
fo elia le tail i ds.
 I sight - Pak Elekt o Ltd.

Co pa A al sis
 I sight - Pak Elekt o Ltd.

Bala e sheet e i al goi g stead

G oss e e ue split
PAEL s aluatio set has fi g ou ds fo e- ati g as a o du i e e i o e t fo de a d
suppo ts ala e sheet health, gua di g agai st ua te l s i gs i p ofita ilit a d apital
li alit . Positi e de a d d a i s i o su e applia e de a d a e o du i e to ou
g o th outlook to PAEL hi h sta ds i a fi pla e ith ega ds to high elati e a ket
sha e seg e ts, i.e. Cash Co s ~ % of Y‘ a e age total g oss sales f o seg e ts
he e PAEL is the la gest pla e . A follo -o f o sustai ed topli e g o th is the a ilit
of PAEL to tape do its de t u de . Flaggi g the u de p essu e Pk‘ s. U“$ pa it
dep e iati g . %CYTD as a st ai o p i i g po e , e u a ea i gs se siti it a al -
sis ith these a ia les. Mo eo e , e o t ast li uidit atios a d ash les fo PAEL at
p ese t a d fo e asted ith those p e aili g i CY A he the o pa e eged o
“ukuk pa e ts. Fu the o e, PAEL has u de take th ee ight s issues si e CY A, ais-
i g ~Pk‘ . i sha eholde ge e ated fu ds fo pai i g a k de t le els a d fi a i g
o ki g apital. U de sta da l a sou e of i esto app ehe sio , the situatio of the
o pa du i g that te uous ju tio sta ds i sta k o t ast to a elati el health al-
a e sheet a d p ofita ilit u e tl i pla .
seg e t

Appliances Division Power Division ‘e- ati g a a ted: We elie e PAEL's aluatio set has p e aili g atal sts to e- ate due
to: g eate oppo tu ities i the po e seg e t as the go e e t s a les to add ess
34% 33% 33% 33%
h o i ele t i it o outs a idst a i effi ie t dist i utio et o k ith possi le p i ati-
46% 48%
43%
zatio s i the pipeli e post ge e al ele tio , i f ast u tu e elated de elop e ts
e a ati g f o CPEC he e po e p oje ts e ai p o i e t a d house uildi g a d
o st u tio a ti it la i g do a u a fo o ust o su e du a le de a d lift-off.
67% 67% 67%
“t o g a ket positio i the applia e di isio a d po e di isio pa ti ula l ef ige ato /
66%
54% 52%
57%
po e t a sfo e a ket sha es of %/ % i CY a e efle ted i CY - A a e age
e e ue o positio of %/ % fo applia es/po e e uip e t. Appl i g the g o th-
sha e BCG at i to PAEL s i di idual p odu t seg e ts e -EPC as a ket sha e data fo
2014A

2015A

2016A

2017A

2018F

2019F

2020F

se i es is u a aila le , e highlight the p e ale e of Cash Co s lo g o th seg e ts

“ou e: PAEL & AKD ‘esea h
he e PAEL e jo s la ge elati e a ket sha es i PAEL s p odu t po tfolio, o stituti g
~ . % of Y‘ a e age g oss sales size of u le i ha t . P ospe ts i the applia es se to
a e elati el ette he e the AC seg e t is a “ta lo a ket sha e i high g o th seg-
e ts hile Deep F eeze seg e t is a Cash Co id-size sha e i sta le g o th seg-
e t.

Growth-Share/BCG Matrix of PAEL Product Segments (share of gross sales)

Air Conditioner, 4.26%

105.0%

85.0%
3YR Industry Growth CAGR %

Microwave Oven, 0.64% 65.0%

45.0%

Refrigerator, 45.62%
Switchgears, 6.86%
Deep Freezer, 5.20%
25.0%

Energy Meter, 6.86% Distribution Transformer, 17.86%

5.0%

1.00 0.80 0.60 0.40 0.20 -

PAEL CY17 Market Share Relative to Largest Competitor( 0-1) -15.0%

“ou e: PAEL & AKD ‘esea h

 I sight - Pak Elekt o Ltd.

Va ia le ost a so ptio : A i dispe sa le easu e of o su e du a le a ufa tu i g p of-

ita ilit e ai s a ia le osts a gi . The deli eatio of a ia le ost o po e ts ate ials,
fa to o e heads a o e-the-li e a d sales & dist i utio , ad i e pe ses elo -the-li e is at
ti es diffi ult, pa ti ula l i the ase of ultiple usi ess seg e ts. Fo PAEL s p odu t li es,
this deli eatio i ol es e o i g oss-seg e t s e gies. I this ega d, e flag ate ial
COG“ ~ %/~ % of total COG“/ a ia le osts as the ajo ost d i e p essu i g a gi s.
Highlighti g s e gies, e sho the EBITDA a gi s of po e e uip e t a d applia e seg-
e t a ufa tu e s, he e PAEL sta ds o fo ta l agai st u h la ge egio al pee s. Thus,
e pa di g o these s e gies, allo ati g apital to BM‘ a d a k a d i teg atio e ai ke to
PAEL s a gi s.

Variable cost components and YoY change in material COGS

100% 5% 40%
15%

YoY Change in Material COGS %

90%
Cost components as % of total

23% 23% 22% 22% 35%

80%
30%
70%
60% 25%

50% 70% 65% 20%

40% 53% 57% 57% 15%
30% 58%
10%
20%
10% 5%

0% 0%
2015A 2016A 2017A 2018F 2019F 2020F

COGS Labour COGS Overheads COGS Materials

SG&A Variable Distribution Costs Discounts
YoY % COGS Materials

“ou e: PAEL epo ts & AKD ‘esea h

Ke a ia les a al sis: Isolati g the i pa t of t o ke a ia les, a el Pk‘ U“$ a iatio s

a d eighted a e age p i i g po e p i e i ease i po e a d applia e di isio s di id-
ed ost es alatio s , e highlight the su sta tial i pa t of these a ia les o alua-
tio s. A al zi g the i pa t of Pk‘ eak ess, e elie e a d ag o p ofits should e iti-
gated p i i g po e ith so e lag i the po e & EPC di isio , solidified o the a k
of health de a d. I easi gl , PAEL jostles ith i po te s a d s all lo al o petito s
hi h ha e lo e sto kholdi g po e a d ope ate o s alle lead ti es fo deli e ies
aki g the o e e posed to ost i eases pa ti ula l Pk‘ eak ess . I positio of
ash deposit e ui e e ts fo i po ts f o the “BP ha e dep essed li uidit fo these
o petito s fu the li iti g thei a ilit to hold lo ost i e to . A e uisite i ease i
p odu t p i es f o highe i po t osts o all follo s hi h effe ti el ope s up the
field fo o petito s i ludi g PAEL to aise p i es as ell. The esults of ou se siti it
sho s that at a assu ed a ual Pk‘ dep e iatio of % p.a th ough to FY F assu i g if
% of the ost i ease is passed-o to o su e s, a e age a ual ea i gs fall . %
o ~Pk‘ . /sh f o ou ase ase. That said, e e % i ease i lo g te Pk‘ dep e ia-
tio s. the U“$ assu i g if o l % of the ost is passed-o edu es ea i gs ~ %o
Pk‘ . /sh a d softe s g oss a gi s ~ ps f o ou ase ase.

GM LH“ a d ea i g ‘H“ se sii it to Pk‘ eak ess a d p i i g po e

LT A ual Pk‘/U“$ Dep e iaio LT A ual Pk‘/U“$ Dep e iaio
% % % % % % % %
Weighted A e age
Weighted A e age

. . % . % . % . % . - . % - . % - . % - . %
P i i g Po e
P i i g Po e

. . % . % . % . % . - . % - . % - . % - . %
. . % . % . % . % . - . % - . % - . % - . %
. . % . % . % . % . - . % - . % - . % - . %
. . % . % . % . % . - . % - . % - . % - . %
. . % . % . % . % . . % . % . % . %
“ou e: AKD ‘esea h
 I sight - Pak Elekt o Ltd.

Snapshot of borrowing arrangements delayed or renegotiated

CY CY
Des ipio Pk‘ Pk‘ Pi i g A a ge e ts & ‘epa e ts
P i atel pla ed sukuks issued i “ep' fo s
- a ou i g to Pk‘ . . No -pa e t of th
“ukuk Fu ds M KIBO‘ + . % i stall e t i De ' led to e egoiated te s.
Pa e ts e-i iiated f o Ju e' .
Fo ei a i g e isi g a hi e issued i
Ju e' fo se e ea s. P i ipal ede pio post
“ukuk Fu ds M KIBO‘ + . % e- egoiaio f o Ju e' i ua te l i stall-
, , ,
e ts ill Ju e' .
P i atel Pla ed
Te Fi a e - M KIBO‘ + % Issued fo apa it e pa sio . ‘e egoiated
Ce ii ates
P i atel Pla ed Co e sio of LT i a e of Pk‘ . a d “T o -
Te Fi a e M KIBO‘ + % o i g of Pk‘ . i CY
-
Ce ii ates

“ou e: PAEL a d AKD ‘esea h

De t oes o o e: PAEL fa ed se e e li uidit u h leadi g to the o pa e egi g o

its pa e t o ligatio s fo “ukuk holde s i CY A fo details see ta le . Follo i g that
f agile pe iod, the o pa e egotiated te s of e-pa e t fo outsta di g loa s, o -
i g to p ese t ti es, he e the o pa has paid do its de t o ligatio s CY A total
i te est ea i g lo g te lia ilities a e do to Pk‘ . s. Pk‘ . i
CY . Fu the o e, et e e ues g e at a CAG‘ of . % o e CY - A a d total assets
li ed to Pk‘ . i CY A s. Pk‘ . i CY A sig if i g a i p o ed th eshold
fo a agi g li uidit . This is efle ted i a i p o ed D/E atio of % i CY E s. %
i CY A a d D/A atio of % i CY E s. % i CY A. Measu es alo g the sa e li es
i ludi g Net De t/EBITDA sho a i eased e du a e to ha dle a e pa ded de t load
a e agi g . o e CY - F s, . o e CY - A , as outflo s a e a aged th ough
sustai ed e uit ultiplies a d highe tu o e s. E phasizi g the eight i flue e of ke
o ki g apital le e s da s e ei a les a d da s i e to i.e. D‘O a d DIO o de t le els
sig ified et de t to EBITDA a d fai alues, e p ese t se siti ities fo these et i s
o e a a ge of assu ptio s. Ou assu ptio s a e lose to p e aili g le els DIO/D‘O as-
su ed to a e age ~ / da s fo CY - F s. ~ / da s fo CY - A hi h a e
a kedl elo le els p e aili g du i g le e age oes CY - A a e age DIO/D‘O of
~ / da s . “ i gs i fai alue a d de t le els usi g a e age et de t to EBITDA
i di ate just a da i ease i DIO a d D‘O edu e fai alue Pk‘~ /sh o
Pk‘ . , hile o pe sati g fo the sa e th ough o o i g aises et de t ~ %
additio al o o i g of Pk‘ . . The efo e, the o ki g apital le e ai s a u ial
data poi t to o ito fo st esses.

A e age Net De t/EBITDA LH“ & TP ‘H“ se sii it to D“O D‘O a iaio s
CY - F A e age Da s of I e to o Ha d CY - F A e age Da s of I e to o Ha d
CY - F A e age
Da s ‘e ei a les

. . . . . . .
. . . . . . .
. . . . . . .
. . . . . . .
. . . . . . .
“ou e: AKD ‘esea h

‘ights ot e ui ed i the ediu te : Addi g to the t ou les of the o pa , follo i g the

CY A episode PAEL has su essfull issued Pk‘ . i ights to sha eholde s diluti g sha e-
holdi g a d aisi g the total u e of sha es % i the spa of th ee ea s. These issues
ha e i eased the float t aded i the a ket, ha i g a diluti e i pa t o sha eholdi g. That
said, i the lo g u fu ds aised f o ight issues ha e assisted i pa i g off e pe si e lo g
te loa s, fi a i g a push to aise p odu tio le els a d ai tai i g a ta get apital st u tu e.
Based o ou esti ates, PAEL sta ds o fi g ou d to sig ifi a tl i p o e f ee ash flo s,
p o idi g oo fo the pa i g a k of lia ilities, ai tai i g di ide ds a d a ped up CAPEX
spe d ithout the eed fo aisi g additio al fu ds th ough ights.
 I sight - Pak Elekt o Ltd.

P efe e e sha e de elop e ts: PAEL issued Class A p efe e e sha es o De , aisi g
Pk‘ agai st autho ized sha e apital of Pk‘ ith li ited o e sio optio afte
s a d o plete o e sio s post issue. Additio all , the issue i luded all optio
e o d s also a i g u ulati e di ide d at the ate of . % p.a. Follo i g the issue, PAEL
fa ed oad lo ks i the fo of a tio f o the “ECP p ohi iti g listi g of p efe e e sha es,
hile PAEL ould ot get app o al f o sha eholde s fo e-p ofili g of its p efe e e sha es
see ti eli e . Cu e tl , p efe e e sha es a ou ti g to Pk‘ . Pk‘ . ha e ee
o e ted to o di a sha es ha e a u ulati e di ide d pa a le of Pk‘ . Pk‘ . /sh
as of De . The dis u se e t of this pa a le e ai s o ti ge t o app o al of e-p ofili g
of sha es ith NBP holdi g out i egotiatio s a d app o al the Boa d ith the pa e t to
e ade f o dist i uta le p ofits i the ea he app o als a e g a ted. Citi g the atio ale
p o ided a age e t a d p e ale t a ou ti g p a ti es e ha e ot i o po ated p efe -
e e di ide d i eithe the apital i ut ha e i luded the i a ual outflo s o a ou t of
ash flo f o fi a i g.

Snapshot of previous right issues

Date ‘ights Issued % P i e/“h Dis ou t ‘ate at i e “tated ‘aio ale
Pk‘ of issue
Pk‘ . aised to st e gthe o ki g
Ja - . % apital a d edu e de t lo e i g i a -
ial ha ges
Pk‘ . aised to ai tai D/E aio
“ep- . % at % post i ease i LT de t
Pk‘ .
E uit i lo of Pk‘ . applied to
Aug- . . % de t ei e e t a d o ki g apital
i a i g.

“ou e: PAEL, AKD ‘esea h

Timeline of Preference Share Corporate Action

Ti e E e t Co e t
Fe - PAEL gets listed
Pk‘ issued at . % p.a, ith all opio
De - Class A P efe e e sha es issued
a d o e sio ate th ee ea s
Pk‘ . i outsta di g p ef sha es, LHC
Lisi g of p efe e e sha es disallo ed
Fe - issued sta agai st “ECP o de , o e sio also
“ECP
sta ed
T a siio f o FY-e d to CY-e d e-
De -
po i g pe iod
PEL i okes o e sio opio fo e i e
Ja -
issue
P oposed e-p oili g of Pk‘ . i Highe oupo ith all opio , o e sio de-
De -
p efe e e sha es stalled la ed to th ea
As of De ' Pk‘ . a ued o p ef. di i-
P ef. sha e lassiied to e uit upo o -
De - de d pa a le, e-p oili g a d “ECP adjudi aio
sultaio ith statuto epo i g odies
pe di g
De - Ti ef a e fo e-p oili g lapses
Pk‘ . as p ef. di ide d pa a le f o dis-
PEL o ki g to i alize se o d e-p oili g
De - t i uta le p oits of the ea of de la aio pe d-
p oposal
i g e-p oili g
“ou e: PAEL, AKD ‘esea h
 I sight - Pak Elekt o Ltd.

Multiplie s o e i all shapes a d fo s

E plo i g the ediu to lo g te outlook fo de a d, e highlight ou ode ate ie
o po e seg e t sales, o e t ati g o tepid a gi s a d edu ed p i i g po e i the
e uip e t s usi ess. I the EPC seg e t, ho e e , e take a o e ullish ie asi g
ou sales g o th assu ptio s o pla ed CAPEX up le a d pu li spe di g, ut o l
afte CY F. Fu the o e, looki g at su essful te de s fo ADB, Wo ld Ba k fi a ed p o-
je ts, e isolate p oje ts la ded PAEL o e CY - A highlighti g the fi s e pe tise
he it o es to po e dist i utio , EPC & e uip e t p oje ts a d app o ed p oje t ids.
Whe eas PAEL s CY A g oss sales i o p ised of o l % i e po ts s. % i CY ,
a age e t o ti ues to flag the e po t a ket as a ke g o th d i e pu sui g att a -
ti e oppo tu ities i a kets su h as Afgha ista a d the GCC. Lastl , e ap a se ies of
e e ts o the ho izo hi h a e eithe a aiti g egulato app o als, a age e t p o -
ess, seg e t e pa sio s a d CPEC p oje ts i late stages that ould ha e a ate ial i -
pa t o the o pa s fai alue p opositio . While highlighti g the likelihood of these
e e ts, e a e ot i o po ati g the i to ou fo e asts, adhe i g to ou ode ate sta e
o fu da e tal the es at pla th ough ou i est e t ho izo .
Net power sector FDI is gaining pace with CPEC

1,400 400%
Annual Power FDI net flows (US$MN)

1,159
1,200
200%
1,000
795 0%

% change YoY
800 711

600 -200%

400 321 282

245 240 201 -400%
131 131 156
200 73
67 40 36 33 69 28 71
-600%
-
(14)
(200) (121) (85) -800%
FY97
FY98
FY99
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
8MFY18
Power (US$mn) YoY % (RHS)

“ou e: MoF, BoI a d AKD ‘esea h

Pulse o the g ou d: P o i e e of e e t a ts O ie t, G ee i esta lishi g a foothold

a d o peti g ith olde a ds u de pi the i easi gl o petiti e d a i s of the do-
esti applia es spa e. It a also e said that p i e is o lo ge the o l ke o su e
pu hase de isio as a ia le featu es, te h olog a d ualit is gai i g i p o i e e. We
elie e the field is ide ope fo lega a ds ith high ualit offe i gs, st o g a d alue
a d upg aded featu es i ludi g PAEL to d asti all i p o e a ket sha e. We asse t that
epla e e t le u e tl at - s is sho te i g, pa ti ula l a o gst u a o su -
e s. These o se atio s a e a d la ge positi e fo PAEL he e the o pa has ade
head a i alle iati g suppl hai sho tages, keepi g sto ks ead fo the su e u i g
seaso a d i t odu i g e featu es.

FDI led i est e ts offe tail i ds fo EPC i o e: Fo eig di e t i est e t has pla ed a
p o i e t ole i guidi g do esti po e se to i est e t he e ajo IPPs ha e e uit
o de t ased o po e ts ei g fu ded fo eig i esto s. Looki g at FDI data si e
FY A, e highlight: a e age a ual FDI i flo of ~U“$ et ee FY - A ith
pe iods of sig ifi a t outflo s FY / A et outflo of U“$ / a d a e age t o-
ea pe iod of FDI et i flo g o th, follo i g the elease of GoP poli ies p o oti g i est-
e ts. That said, FDI i flo s fail to aptu e the e ti e ua tu of i est e ts i the spa e
as ost fo eig i flo s a e de t a a ge e ts hile ajo it of O&M/EPC o t a to s fo
these p oje ts e ai Chi ese ulti atio als. To that e d, the o siste t pi k-up i po e
se to FDI i flo s du i g the outgoi g Go e e t s te u e is i efuta le, he e FY - A
 I sight - Pak Elekt o Ltd.

PAEL’s successful bids for goods & services - ADB projects

P oje t T pe Age Co t a t A ou t U“$ Mo th
P o u e e t of / . KV po e t a sfo es “uppl of
PEPCO “ept'
Goods , ,
P o u e e t of , / . KV, KVA Pole “uppl of
Mou ted T a sfo e PMTs PEPCO Ma '
goods ,
Te de fo KV D.I. KHAN
Co st u io NTDC No '
, ,
Te de fo KV Chakda a i il o ks EPC
Co st u io NTDC No '
, ,
Te de fo KV No she a i il o ks EPC
Co st u io NTDC No '
, ,
EPC of Bu h Villas Housi g “o iet g id staio
a d t a s issio li e Tu ke PEPCO O t'
, ,
EPC of Pu ja Go e e t Housi g “o iet g id
staio a d t a s issio li e Tu ke PEPCO O t'
, ,
Po ue e t of / . KV, Pole Mou ted “uppl of
NTDC Aug'
T a sfo e PMTs goods , ,
Po ue e t of po e t a sfo e u de sa - “uppl of
PEPCO Ju e'
i gs goods , ,
EPC of KV G id staio at Ah edpu “ial to
KV KM sta da d t a s issio li e Tu ke PEPCO Ju e'
, ,
EPC of KV to KV G id staio at Da a , D.I.
Tu ke PEPCO Ma '
Kha , ,
Po ue e t of / . KV, . / MVA po e “uppl of
PEPCO Ma '
t a sfo e goods , ,
Po ue e t of fou / . KV, / MVA a d “uppl of
/ . KV . / MVA po e t a sfo e s PEPCO Ap '
goods , ,
Po ue e t of k o t ol, ela a d s it h- “uppl of
PEPCO Ap '
gea pa els goods , ,
Po ue e t of th ee, / . k , . / a “uppl of
po e t a sfo e s PE“CO PEPCO Fe '
goods , ,
P o u e e t of o t ol, ela a d k pa els “uppl of
PEPCO No '
fo IE“CO goods , ,
P o u e e t of / . k , . / aa d “uppl of
/ a po e t a sfo e s PEPCO Aug'
goods , ,
P o u e e t of / . k , / & . / “uppl of
a po e t a sfo e s PEPCO Jul '
goods , ,
“ou e: ADB G&“ “u essful Bidde s list & AKD ‘esea h

a e age a ual i flo s g e to U“$ peaki g i FY A U“$ . hile e ai i g

st o g th ough MFY U“$ i flo . Pa si g th ough o t a ts a a ded i goods,
o ks a d se i es fo ADB fi a ed p oje ts, e isolate p oje ts se u ed PAEL o e CY -
A highlighti g the fi s e pe tise he it o es to po e dist i utio , EPC & e uip e t
p oje ts a d app o ed p oje t ids. O e all, ua tu of p oje ts peaked du i g CY A,
I te aio al fu di g fa iliies s apshot he e PAEL had se u ed U“$ . i p oje ts, falli g to U“$ . i CY , sho i g the
CY - fo T&D i Pakista lu ped atu e of o t a ts a a ded th ough these age ies. We e pe ted that FDI flo s
I te aio al P oje t “pe ii ill st e gthe ith the i ple e tatio of ea l ha est CPEC p oje ts. I the lo g u , ad-
Fu di g Age Co it e ts U“$M d essi g fis al i pedi e ts oade i g the ta et a d o plia e, oupled ith e po t
o petiti e ess ould e ke i att a ti g these i flo s.
ADB Pu li “e to ,
Data sho s a ele ati g spe di g: A o di g to data pu lished the Mi ist of Fi a e,
ADB P i ate “e to ~ % of total esti ated p oje t ost i the po e se to is e pe ted to e fu ded fo eig
age ies i FY a ou ti g to Pk‘ . t /Pk‘ . as of FY A/FY B . These p oje ts
Wo ld Ba k ,
deepe the de a d fo po e e uip e t sig ifi a tl as additio al ge e atio apa it
JICA
feeds i to a ious t a s issio a d dist i utio i est e ts do the li e. Additio all ,
age ies su h as the ADB, IB‘D a d EU i stitutio s de a d st i ge t p odu t sta da ds
U“AID hile p oje t osts a e paid fo i fo eig u e , li iti g FX isks fo supplie s of e uip-
“ou e: ADB Fu di g Do u e ts e t. Looki g at e e g se to p oje ts o itted th ough loa /aid a a ge e ts de la ed
i te atio al age ies - e isolate the la gest o itted age as ei g the
ADB follo ed the Wo ld Ba k. A o gst the app o ed p oje ts he e o i g ge e atio
spe ifi p oje t o it e ts, e a i e at U“$ . i o itted p oje ts the ADB,
follo ed U“$ . the WB, i te esti gl , the Japa I te atio al Coope atio Age
has the thi d highest o itted fu di g fo t a s issio a d dist i utio e ha e e ts at
 I sight - Pak Elekt o Ltd.

U“$ o e - . The sha e of fo eig fu ded p oje ts o t i uti g to PAEL s g oss

sales o e the lo g te sta ds at ~ %, he e ADB fu ded p oje ts a ou t fo the ajo it
of these p oje ts a o e % .
O e u de ed T&D s ste : ‘e e t i ease i ge e atio le els odes ell fo po e se to
sustai a ilit as the p ese t a eplate apa it , MW fo the atio al g id a d
, MW fo KEL is o ei g u at highe load fa to s, a sig of i p o i g ope atio s i
the spa e. I the lo g u , e e pe t total ge e atio to ise at a fo a d CAG‘ of . %
p.a. That said, the a se e of o ete gai s i edu i g s ste losses . %/~ % fo PEP-
CO/KEL a d est ai ed CAPEX o T&D e uip e t lea es us pessi isti fo sustai ed T&D
CAPEX o the pu li DI“CO le el. Ou a al sis of NTDC data ega di g t a sfo e apa i-
ta e oltage , , , & kV a d po e u its sold e o o i g oup
do esti , o e ial, i dust ial, ag i ultu e & othe s i G H, sho s st o g o elatio s
et ee the t o a ia les he e do esti o su e suppl o elatio s a oss all apa it
seg e ts is e lo . s. . fo the e ti e s ste . This e eals the i e se oo fo
apa it additio s o the dist i utio e d, he e appl i g ou . % o pou ded g o th
assu ptio fo et u its t a s itted th ough to CY F, e a i e at a additio al apa i-
ta e e ui e e t of , MVA, i di ati g a pote tial ~ % i ease i the s ste s MVA
et ee CY - F.

Correlations show small capacity distribution transformers are overburdened

Capa it atego Pu li Co e ial I dust ial Ag i ultu al Total
G H “upplied atego
KV . . . . .
KV . . . . .
KV . . . . .
KV & KV . . . . .
Total MVA . . . . .
“ou e: NTDC a d AKD ‘esea h

E e t isks alo g the at hto e : We ap a se ies of e e ts o the ho izo hi h a e ei-

PAEL: E e ts ap & ke e t page ; the a aiti g egulato app o als, a age e t p o ess, o po ate a tio s, o petiti e
a eta-a al sis d a i s a d ide do esti poli /p oje t i ple e tatio , seg e t e pa sio s a d CPEC
Highl Likel p oje ts i late stages that ould ha e a ate ial i pa t o the o pa s fai alue p op-
ositio . While postu i g to a ds these de elop e ts a d oti g thei likelihood, e st ess
thei a se e f o ou fo e asts. Mo eo e , adhe i g to ou ode ate sta e o fu da e -
tal the es at pla th ough ou i est e t ho izo , ou fo e asts do ot a o odate these
e e ts. I sho t, e elie e a u e of e te al poli ies holesale po e se to efo s,
Ve holisti f a e o k fo “E)s, ta iff li es fo applia e/ o po e ts i t ade egotiatio s a d
Positi e a age e t a tio pe et atio i to etail, di e sifi atio that eed to stalize fo us to
Ve update ou fo e asts. Fo e.g. du i g FY , the MOW&P gai ed app o al fo the i stallatio
Negati e of Ad a ed Mete i g I f ast u tu e AMI s ste s, ith a total pla ed e pe ditu e of
Pk‘ . fo IE“CO a d Pk‘ . fo LE“CO a o gst a PK‘ i est e t pla fo DI“-
COs ased o MYT de isio s NEP‘A fa i g judi ial i pedi e ts to i ple e tatio ith
DICOs ei g ajo det a to s . Pu el fo i di ati e pu poses, had this s he e ee i ple-
e ted, ith a ual pla s fo e ete se i e o e tio s, e t a sfo e s a d e-
Highl U likel pla e e t t a sfo e s e a ted i just th ee top-tie DI“COs IE“CO, LE“CO, FE“CO a lead
to sustai ed a ual de a d g o th of . %/ . % th ough to FY - F. To that e d, head-
“ou e: AKD ‘esea h a o p i atizatio , i ou opi io , is a ke e a le fo these efo s, he e e o al of
pu li se to oad lo ks a d defi ie ies a o l e a hie ed i p o ed o po ate go -
e a e a d a ou ta ilit to sha eholde s.
 I sight - Pak Elekt o Ltd.

Comprehensive events matrix key and brief comment on impact

# E e t Co e t
I p o ed o po ate go e a e follo i g o e haul of a age e t p a i es to p o ote ei ie t usi ess p a i es

P i aizaio of DI“COs I ple e taio of CAPEX pla s to u tail te h i al losses i ludes edu i g st ai o t a sfo e i f ast u tu e
Upg adaio of t a s issio s ste i f ast u tu e, ith possi le i eases i heeli g a a ge e ts a d ulk-suppl
ta ifs to housi g p oje ts i easi g de a d fo dist i uio t a sfo e s
I eased le ies o o po e ts to p o ote a k a d i teg aio applia e a ufa tu e s ould eigh o osts
G eate Le ies o I puts
Without i e i es fo i p o ed lo alizaio o o po e t a ufa tu i g i eased le ies ill e pu ii e i atu e
Peak seaso dis ou i g is a agg essi e o e to aptu e a ket sha e he e applia e a ufa tu e s ofe dis-
Co i ui g peak seaso dis ou i g ou ts o list p i e to g o a ket sha e
I di ai e of a la k of p i i g dis ipli e, peak seaso dis ou i g is iigated i dust o solidaio
Value a ei e a ufa tu i g of o e o po e ts o a illa pa ts a e ke ost u tail e t easu es
Ba k a d i teg aio fo o po e ts
Dut st u tu e p o oted a k a d i teg aio fo ost u tail e ts
Pakista as e e tl a ked as the o lds fastest g o i g a ket fo etail Eu o o ito ith e pe ted Y‘ fo -
a dg o th of . %, pushed a outh ulge
Fo a d I teg aio , High-e d ‘etail ‘etail sto e u its a e e pe ted to hit ith alls a d high-e d etail gai i g stea
Middle lass households a e e pe ted to ea h a i g as atal sts fo o su e du a le de a d
I dia, Chi a, Viet a , Ba gladesh a d “ i La ka ha e a i g deg ees of i e i es fo ele t i al o po e t a u-
fa tu e s i seg egated luste s
P efe e ial a ess to e po t a d i po t fa iliies edu i g logisi al e pe ses, usto s lea a e soluio s p io it /
Fa ilit e pa sio to “E)s g ee - ha el lea a e ith ea dut f ee i po t of apital goods a d o po ate ta ate holida s
Va ious i e i es fo i eased ‘&D e pe ditu es Chi a ofe s up to % o po ate ta e e pio s o ‘&D e pe d-
itu es g o i g o e tha % , hile e e pio s o ta es o apital i puts uiliies, egist aio duies, la d use
fees
Co pa ies ith fo eig e uit pa i ipaio a e fa o ed
Co e ial Heai g Ve ilaio Ai Co diio i g a ket ~U“$ is do i ated o e ial e uip e t sales
~ % sha e ith ate a ket se i es o th ~ % of the total a ket i
Co t ol/s ste s se i es used p i a il i the o e ial a ket U“$ . glo al a ket size a e e essa fo
food, pha a eui al a d e e ages i dust health egulaio s , hile u e ous a illa o e ial appli aio s
Co e ial EPC soluio s fo HVAC
e ai
Du tless split AC a ket akes up ~ % of total i dust e uip e t a ket sha e, he e JVs a d te h i al ag ee-
e ts ith glo al supplie s Daiki , T a e, Le o , Fujitsu, Hita hi ould p o oted i ple e taio of HVAC
plafo s lo all
Mo e to o peii e iddi g, si gle- u e plus odel ould e ui e o p ehe si e T&D o e hauli g
I ple e taio of holesale po e “ oothe fu io i g ith ele i e allo aio of u its ge e ated a d outed th ough e t al pu hase to dist i u-
efo s io et o k
I eased CAPEX ith sig ii a t oo fo i ple e i g poi t to poi t AMI
Cu e tl egoiaio s ith Chi a, I do esia, Tu ke , Ba gladesh a d “i gapo e
FTA ith applia e ta if li e edu - Bilate al o ulilate al ag ee e ts ith u tailed ta ifs o i po ts of i ished applia es ould e det i e tal to
io s p i i g po e
I eased i teg aio of glo al applia e a ufa tu i g suppl hai p o pted t ade li e alizaio ould assist i
lo e i g i put osts fo these a ufa tu e s a i g as a possi le atal st fo e t i to Pakista
U o st ai ed de a d e ai s a elusi e o ept he e e elie e the % g o th ate fo de a d i o po ated
ost egulato age ies se e el supp essed t ue ele t i it de a d
Ele t i it suppl to eet This pe t-up de a d fo po e a e see as ge e aio o i ues to ise, he e pote ial oo fo applia e
u o st ai ed de a d seg e t g o th ill e see
Households o su e ~ % of total ele t i it o situi g the la gest seg e t of o su e s
“ou e: JPM HVAC Co e age & Chi ese Dis eio a “e to , Xe i Glo al Wo ld Ho e Applia e Ma ufa tu e s t e ds & st ategies - , Pakista E e g “u sid
‘efo s—WB—August, , Ele t o i s i “outh Asia: Poli ies to Boost Co peii e ess a d C eate the Ne t E po t Po e house –WB-O to e , , I pa t of Ele -
t i it “ho tages o Fi P odu i it ; E ide e f o Pakista —WB– Ju e, , Cha pio i g Cha ge i I dia Applia e a d Co su e Ele t o i s I dust —PWC—
No e e , Ele t o i s Ma ufa tu i g i I dia—F ost & “ulli a —O t, , Bloo e g a d AKD ‘esea h
 I sight - Pak Elekt o Ltd.

Pakista i su e s de a d ooli g: B ief i t o to the

HVAC a ket
Cii g the g o i g ho us of esea h poi i g to Pakista 's e posu e to li ate ha ge a d
its det i e ts. The ADB i its latest Cli ate Cha ge P oile of Pakista sho ases . deg ee
de iaio f o lo g te a e ages ea a e age o thl te pe atu es o t asted
ith CY i g aph . Fo e asts i di ate fu the i te sii aio of the sa e, as te pe atu es
“paial dist i uio of ea a ual te - u de a ode ate e issio s odel i di ate te pe atu es isi g - deg ees o e ea o -
pe atu es se aio s.

Temperatures are rising, summers of increased intensity lasting longer

30 1986-2005 Average Monthly
Temperature
CY15
25
Average Monthly Temperature Celsuis

20

15

10

“ou e: PMD
0
Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec

“ou e: WB, PMD & AKD ‘esea h

Fi di g d a i data poi ts ega di g de a d fo applia es is e t e el dii ult ith ost

sou es epo i g p odu io , a d a ket size ith a sig ii a t lag i epo ted igu es. Fo
the pu poses of illust ai g the highl seaso al atu e of ai o diio i g de a d s othe
household applia es, e pull data f o Google t e ds, usi g elai e i te est i the topi s
as p o fo p odu t de a d ot e essa il sales, just o su e i te est i p odu ts o
ofe , p i es et . Looki g at a i e-se ies of the sa e, the i te est i ai o diio i g a e
see spiki g i the o set of highe te pe atu es egi i g as ea l as Fe e te di g to e d
of o soo pe iod Aug-“ept .

Air Conditioning demand is more seasonal than other appliances

100
Air conditioning
Relative Topic Google Search (Max 100)

90

80
Microwave
70 Owen

60 Refrigerator
50

40

30

20

10

0
Feb-11

Feb-12

Feb-13

Feb-14

Feb-15

Feb-16

Feb-17

Feb-18
May-10
Aug-10
Nov-10

May-11
Aug-11
Nov-11

May-12
Aug-12
Nov-12

May-13
Aug-13
Nov-13

May-14
Aug-14
Nov-14

May-15
Aug-15
Nov-15

May-16
Aug-16
Nov-16

May-17
Aug-17
Nov-17

May-18

“ou e: Google Topi T e ds & AKD ‘esea h

We gi e a ief des ipio of the do esi AC a ket, highlighi g the o ki g o Mi i-split

t pe AC's. Mo eo e , e gi e a u -do of the o po e ts a d osts i ol ed i a ufa -
tu i g a d u i g AC's o t asi g the ith othe ooli g alte ai es.
Po e o su pio e ai s a ke hi d a e to AC o su e s as the a e age -to o -
i e te AC o su es ~ , W a d the sa e ith a i e te o su es ~ W. This sta ds
i st o g o t ast to othe household applia es a d astl su passi g do esi ooli g al-
te ai es.
 I sight - Pak Elekt o Ltd.

Appliance power usage (KwH) for an hour of use

1.5
Majo U ita AC Co po e t Costs
Asia ‘egio A e age as % of G oss 1.4

“ales P i e 1.2
Co po e t Without With
1
I e te I e te 0.9

0.8
Co p esso % %
0.6
Moto % %
0.4
Coils % %
0.18
Coppe Tu i g % % 0.06 0.08 0.09 0.2

‘ef ige a ts % % 0
Bracket Fan Ceiling Fan Inverter Fridge Conventional Fridge (12-15 1 ton inverter AC 1 ton AC
Du t Boa d % % Cu ft.)

Co t ols % %
“ou e: K-Ele t i & AKD ‘esea h
“teel/Alu i iu % %
I e te - % Do esi AC de a d is do i ated s all fo , i i-split a ia t of AC's ith li ited
“ou e: AKD ‘esea h
o e ial appli aio s glo all , is ha a te ized a outdoo o de si g u it o e ted
di e tl to o e o o e i doo ai ha dli g u its. The te " i i" elates t pi all to the
s all i doo u its, hi h a e usuall ou ted o the all o eili g a d a e o t olled i di-
iduall i ea h oo .
Consumer durable cooling alternatives
Pa a ete s Fa s Ai Coole AC
Cooli g Lo Lo High
‘e u i g Cost Lo ~ % of AC High
I doo Ai Qualit Ci ulates i te al ai F esh ilte ed ool ai “tale d ai e- i ulated
‘ef ige a ts No e Wate ‘ ,‘ A h d oluo o a o s
Po ta ilit No Yes No
Usage I doo Outdoo & I doo I doo O l
Hu idit No e Less Efe i e Efe i e
“ou e: AKD ‘esea h

The asi s of ooli g th ough this a ia t t pe e ol es a ou d the o de si g u it, hi h

sits outside ith pipes that pass the ef ige a t et ee the outdoo u it a d the i doo
oil. Fo this easo , the e ui e a o t a to /se i e e to i stall.
Du tless Wi do o oo ai o diio i g is du tless e uip e t a d is a s all, self-
o tai ed s ste that houses a oil a d a o p esso usuall used fo the ooli g of a si gle
oo . These p odu ts a e o e o odiized a d do i ated lo - ost p odu e s.
P i a o po e ts ithi a eside ial s ste a e a o p esso , a oto , oils, ef ige a t,
oppe tu i g, a d othe a ate ials used to pa kage the s ste du t oa d fo e ila-
io s ste s a d steel, oppe , a d alu i u fo pa kagi g, et . .
E ludi g du t oa d a d o t ol s ste s, e esi ate that the s ste o po e ts ost
~ % of the total, ith a othe ~ % fo dis ou ts a d the e ai i g ~ % fo la o /
o e head osts.
A i e te is esse iall a a ia le f e ue d i e, s oothi g the pa e at hi h the oto
u s to ai tai the te pe atu e set poi t ithout tu i g the a hi e o a d of. This
akes the o p esso oth o e ei ie t a d less p o e to eakdo .
I e te te h olog is o o i Asia a kets like Japa a d Chi a, he e pla e s like
Daiki a d LG ha e a sig ii a t sha e of the o p esso a ket, a d the egio 's la ge u it
olu e has helped these supplie s ea h ii al ass ith s ale a d ost ad a tages e sus
othe supplie s.
JA‘N esi ates that i e te pe et aio i Chi a sta ds at ~ %.I e te pe et aio is
ei g d i e e e tl ef ige aio e uip e t g o th.
The ai issue i adopio is ot te h olog ut athe ost as i e te o p esso s a e
oughl - % o e e pe si e, hi h at the o e t akes it ha d to desig i to ass-
a ket s ste s at a easo a le p i e.
 I sight - Pak Elekt o Ltd.

PAEL: A ual Data a k — Co solidated

Valuaio Muliples
(Yea E d De - CY A CY A CY F CY F CY F
EP“ Pk‘ * . . . . .
NPAT G o th . % - . % - . % . % . %
PE‘ . . . . .
‘OE e -‘e al “u plus . % . % . % . % . %
‘OA . % . % . % . % . %
Cu e t ‘aio . . . . .
CF“ Pk‘ . . . . .
P/CF“ . . . . .
BV“ Pk‘ . . . . .
P/BV“ . . . . .
DP“ Pk‘ . . . . .
Di ide d ield . % . % . % . % . %
Pa out ‘aio . % . % . % . % . %
De t/E uit . % . % . % . % . %
De t/Assets . % . % . % . % . %

I o e “tate e t
(Pk‘ CY A CY A CY F CY F CY F
Net “ales , , , , ,
COG“ ( , ( , ( , ( , ( ,
G oss P oit , , , , ,
Othe I o e less Othe e pe ses ( , ( , ( , ( , ( ,
Ope ai g P oit , , , , ,
Othe I o e
EBITDA , , , , ,
Fi a ial a d othe ha ges ( , ( , ( , ( , ( ,

Ta aio ( ( ( ( (
Net P oit , , , , ,

Bala e “heet
(Pk‘ CY A CY A CY F CY F CY F
Cu e t Assets , , , , ,
Fi ed Assets , , , , ,
Total Assets , , , , ,
Cu e t Lia iliies , , , , ,
Lo g-te Lia iliies , , , , ,
“ha e Holde s E uit , , , , ,
‘e aluaio “u plus , , , , ,
Tot.al Lia iliies & E uit , , , , ,

Cash Flo
(Pk‘ CY A CY A CY F CY F CY F
Cash f o Ope ai g A i iies , , , ,
Cash f o I esi g A i iies ( , ( , ( , ( , ( ,

Cash f o Fi a ial A i iies , (

Net hg. I ash & e ui . ( ( ( ( (

Cash & E ui . At eg. of the ea
Cash & E ui . At e d of the pe iod
“ou e: Co pa ‘epo t & AKD ‘esea h
 I sight - Pak Elekt o Ltd.

PAEL: Qua te l Data a k

Valuaio Muliples
Yea E d De - QCY QCY QCY QCY QCY
EP“ Pk‘ . . . . .
EP“ g o th . % . % - . % . % . %
‘OE a ualized . % . % . % . % . %
‘OA a ualized . % . % . % . % . %
BV“ Pk‘ . . . . .
P/BV“ . . . . .
CF“ Pk‘ . . . . .
P/CF“ . . . . .
“ales G o th . % . % - . % - . % . %
NPAT G o th . % . % - . % . % . %
G oss Ma gi . % . % . % . % . %
Ope ai g Ma gi . % . % . % . % . %
Net Ma gi . % . % . % . % . %
Efe i e ta ate . % . % . % - . % . %

I o e “tate e t
I Pk‘ QCY QCY QCY QCY QCY
Net “ales , , , , ,
COG“ , , , , ,
G oss P oit , , , , ,
Ope ai g E p ,
Ope ai g P oit , , ,
Othe I o e -
Othe Cha ges
Fi a ial Cha ges
NPBT , ,
Ta aio -
NPAT , ,

Bala e “heet
I Pk‘ QCY QCY QCY QCY QCY
Lo g Te Assets , , , , ,
Cu e t Assets , , , , ,
Total Assets , , , , ,
Lo g Te Lia iliies , , , , ,
Cu e t Lia iliies , , , , ,
Total Lia iliies , , , , ,
“ha e Holde s' E uit , , , , ,
Total Lia iliies & E uit , , , , ,

Cash lo “tate e t
I Pk‘ QCY QCY QCY QCY QCY
CF f o ope aio s , , ,
CF f o i esi g a i iies , , ,
CF f o i a i g a i iies , , , ,
Net hg. I ash & e ui .
Cash & E ui . At eg
Cash & E ui . At e d
“ou e: Co pa ‘epo t & AKD ‘esea h
 I sight - Pak Elekt o Ltd.

Notes:
 I sight - Pak Elekt o Ltd.

AKD “e u iies Li ited

T‘EC Holde & ‘egiste ed B oke
Pakista “to k E ha ge ‘EP-

Rating Definitions
Buy > 20% upside potential
Accumulate > 5% to < 20% upside potential
Neutral < 5% to > -5% potential
Reduce < -5% to > -20% downside potential
Sell < -20% downside potential

Dis losures & Dis lai ers

This pu li aio / o u i aio o a po io he eof a ot e ep i ted, sold o edist i uted ithout the ite o se t of AKD “e u iies Li ited. AKD
“e u iies Li ited has p odu ed this epo t fo p i ate i ulaio to p ofessio al a d i situio al lie ts o l . The i fo aio , opi io s a d esi ates he ei
a e ot di e ted at, o i te ded fo dist i uio to o use , a pe so o e it i a ju isdi io he e doi g so ould e o t a to la o egulaio o
hi h ould su je t AKD “e u iies Li ited to a addiio al egist aio o li e si g e ui e e t ithi su h ju isdi io . The i fo aio a d staisi al data
he ei ha e ee o tai ed f o sou es e elie e to e elia le a d o plied ou esea h depa t e t i good faith. “u h i fo aio has ot ee
i depe de tl e iied a d e ake o ep ese taio o a a t as to its a u a , o plete ess o o e t ess. A opi io s o esi ates he ei ele t
the judg e t of AKD “e u iies Li ited at the date of this pu li aio / o u i aio a d a e su je t to ha ge at a i e ithout oi e.

This epo t is ot a soli itaio o a ofe to u o sell a of the se u iies e io ed he ei . It is fo i fo aio pu poses o l a d is ot i te ded to
p o ide p ofessio al, i est e t o a othe t pe of ad i e o e o e daio a d does ot take i to a ou t the pa i ula i est e t o je i es, i a ial
situaio o eeds of i di idual e ipie ts. Befo e a i g o a i fo aio i this pu li aio / o u i aio , ou should o side hethe it is suita le fo
ou pa i ula i u sta es a d, if app op iate, seek p ofessio al ad i e. Neithe AKD “e u iies Li ited o a of its ailiates o a othe pe so o e t-
ed ith the o pa a epts a lia ilit hatsoe e fo a di e t o o se ue ial loss a isi g f o a use of this epo t o the i fo aio o tai ed
the ei .

“u je t to a appli a le la s a d egulaio s, AKD “e u iies Li ited, its ailiates o g oup o pa ies o i di iduals o e ted ith AKD “e u iies Li ited
a ha e used the i fo aio o tai ed he ei efo e pu li aio a d a ha e posiio s i , a f o i e to i e pu hase o sell o ha e a ate ial
i te est i a of the se u iies e io ed o elated se u iies o a u e tl o i futu e ha e o ha e had a elaio ship ith, o a p o ide o ha e
p o ided i est e t a ki g, apital a kets a d/o othe se i es to, the e iies efe ed to he ei , thei ad iso s a d/o a othe o e ted pa ies.

AKD “e u iies Li ited the o pa o pe so s o e ted ith it a f o i e to i e ha e a i est e t a ki g o othe elaio ship, i ludi g ut ot
li ited to, the pa i ipaio o i est e t i o e ial a ki g t a sa io i ludi g loa s ith so e o all of the issue s e io ed the ei , eithe fo
thei o a ou t o the a ou t of thei usto e s. Pe so s o e ted ith the o pa a p o ide o po ate i a e a d othe se i es to the issue of
the se u iies e io ed he ei , i ludi g the issua e of opio s o se u iies e io ed he ei o a elated i est e t a d a ake a pu hase a d/o
sale of the se u iies o a elated i est e t f o i e to i e i the ope a ket o othe ise, i ea h ase eithe as p i ipal o age t.

This do u e t is ei g dist i uted i the U ited “tate solel to " ajo i situio al i esto s" as dei ed i ‘ule a- u de the U.“. “e u iies E ha ge A t
of , a d a ot e fu ished to a othe pe so i the U ited “tates. Ea h U.“. pe so that e ei es this do u e t its a epta e he eof ep ese ts
a d ag ees that it: is a " ajo i situio al i esto ", as so dei ed; a d u de sta ds the hole do u e t. A su h pe so ishi g to follo -up a of the
i fo aio should do so o ta i g a egiste ed ep ese tai e of AKD “e u iies Li ited.

The se u iies dis ussed i this epo t a ot e eligi le fo sale i so e states i the U.“. o i so e ou t ies.

A e ipie t, othe tha a U.“. e ipie t that ishes fu the i fo aio should o ta t the o pa .

This epo t a ot e ep odu ed, dist i uted o pu lished, i hole o i pa t, a e ipie t he eof fo a pu pose.