Pak Elektron Limited Posts 97% Profit Growth in 9 Months

Pak Elektron Limited (PAEL) announced its 3Q2024 result wherein it posted earnings of Rs. 448 million (EPS of Rs. 0.52) up by 7 percent YoY and down by 54 percent QoQ. For 9M2024, PAT arrived at Rs. 1.863 billion, up 97 percent YoY. Earnings came lower than expectations due to lower-than-expected revenue, Topline Securities said in a review on Thursday. Earnings are up by 7 percent YoY in 3Q2024 mainly due to an increase in net revenue and a lower effective tax rate in the quarter. Revenue for 3Q2024 increased by 14 percent YoY and decreased by 35 percent QoQ to Rs. 11.3 billion. YoY Growth has been driven by volumetric growth in the Appliance and Power Division. Conversely, revenue in 3Q2024 decreased by 35 percent QoQ mainly due to seasonality. To recall, the summer season impact of higher volumetric sales was present in 202024. The effective tax rate in 302024 stood at 27 percent compared to 43 percent in 3Q2023 and 37 percent in 2Q2024. In 9M2024 effective tax rate was recorded at 42 percent compared to 45 percent in 9M2023. Gross margins in 3Q2024 declined to 25.9 percent compared to 27.6 percent in 3Q2023 and 26.6 percent in 2Q2024. Distribution expenses in 3Q2024 increased by 48 percent YoY to Rs. 776 million due to higher volumetric sales and inflationary impact. In 9M2024, earnings increased by 97 percent YoY to Rs. 1.86 billion. The main reason for higher earnings is growth in revenue of 35 percent YoY, led by higher volumetric sales and an increase in average selling prices according to channel checks. As per channel checks Appliances division and Power division have witnessed substantial volumetric growth in 9M2024. Gross margins in 9M2024 remained constant at 26.5 percent compared to 9M2023. PAEL is trading at 2024E/2025F PE of 8.4/5.6x compared to 10-year average PE of 9.6x.