Airlink Earnings Estimates for FY25
Staff Report
Islamabad: Topline has revised its earnings estimates for Airlink Communication (AIRLINK) downward by 41% for FY25 and 36% for FY26 to Rs8.7/share and Rs13.7/share, respectively, incorporating lower-than-expected 9MFY25 results due to a decline in mobile sales and higher borrowings.
Decline in Mobile Sales: As per the latest data released by the Pakistan Telecommunication Authority (PTA), local mobile companies manufactured/assembled 26.09mn units, down 8% YoY. According to channel checks, decline in mobile phone sales is attributed to: (1) high base effect from last year, (2) an extended mobile replacement cycle due to a lack of exciting new model launches, and (3) reduced consumer spending amid high inflation over past few years.
AirLink Earnings Down 48% in 3QFY25
AIRLINK also witnessed a decline in sales, which stood at Rs85bn, down 8% YoY in 9MFY25. However, we now expect full-year revenue to be Rs110bn in FY25 and Rs130bn in FY26, compared to our earlier expectations of Rs139bn and Rs168bn, respectively.
Higher Borrowings led to Higher Finance Cost: AIRLINK’s working capital has come under pressure over the past two quarters due to a slowdown in mobile phone demand. As per our channel checks, amid weaker sales, the company has extended its credit period to 40 days from the earlier 15–20 days, while continuing to make timely payments to its suppliers. To support its working capital requirements, AIRLINK’s short-term borrowings nearly doubled to Rs28bn in 3QFY25, compared to Rs16bn in 1QFY25. Going forward, we estimate borrowings to normalize in the range of Rs15bn from next year onwards.
Shifting to New Factory to Save Tax: AIRLINK has acquired an 8-acre plot in the Sundar Green Special Economic Zone. The benefits of this acquisition include a 10-year tax holiday and a one-time GST exemption on the import of machinery. Construction has already commenced, and we assume that production will shift to the new facility in 2HFY26.
Valuations: We maintain our BUY stance on AIRLINK with a revised DCF-based Target Price (TP) of Rs200/share, implying a total upside of 32% from our earlier TP of Rs230/share. AIRLINK is currently trading at FY25E and FY26F P/E multiples of 17.7x and 11.2x. At our TP of Rs200/share, stock implies a P/E of 14.6x based on FY26 earnings.
Key Risks: (1) higher than expected slowdown in mobile sales, (2) Import restrictions where AIRLINK is not able to import parts, (3) higher than expected rupee devaluation against US dollar, (4) higher than expected competition, and (5) technological advancement where AIRLINK unable to meet customer requirements resulting in lower sales.
Key Upside: Approval for mobile phone exports would be a major upside trigger for the company. So far, we have not incorporated exports into our financial model.
