Local Manufacturing of Mobile Phones Down 20% YoY in July 2024

Staff Report: As per the latest data released by the Pakistan Telecommunication Authority (PTA), local mobile companies have manufactured/assembled 1.61 million units, reflecting a 20% year-on-year decline and a 62% month-on-month decrease in July 2024.

The decline in mobile sales in July 2024 is attributed to pre-buying in June 2024 following the announcement of an 18% GST on all mobile phones in the FY25 budget.

However, over the last two months (June-July 2024), average sales were 2.9 million units, still higher than the five-month (January-May 2024) average of 2.6 million units.

In the first seven months of 2024, total locally manufactured/assembled sales reached 18.95 million units, up 2.3 times year-on-year. This significant improvement is mainly due to import restrictions imposed last year.

However, compared to the first seven months of 2022, the growth is 27% year-on-year. This growth is primarily driven by gradual economic recovery, an increasing share of locally assembled mobile phones amid higher taxes on imported phones, and a growing population, among other factors.

Within the locally assembled mobile phones of 18.95 million units during the first seven months of 2024, 64% (12.1 million units) are smartphones, while the remaining 36% (6.85 million units) are 2G phones.

The top 10 locally assembled brands during the first seven months of 2024 include Infinix (2.76 million units), followed by Itel (2.12 million units), VGO Tel (2.01 million units), Tecno (1.96 million units), Vivo (1.71 million units), Xiaomi (1.70 million units), Realme (1.15 million units), Nokia (0.83 million units), G’Five (0.71 million units), and OPPO (0.63 million units).

Outlook: According to our channel checks, based on the current monthly run rate and the recent imposition of an 18% sales tax on all mobile phones in the FY25 budget, total mobile phone demand may reach 33 million units in 2024, compared to 22.9 million units sold in 2023, representing a 44% year-on-year increase.

Buy Stance on AIRLINK: Within the listed sector, we believe Air Link Communication (AIRLINK) is well-positioned to capitalize on rising smartphone sales in Pakistan. We have a buy stance on AIRLINK, with the stock trading at a FY25F P/E of 8.7x and a FY26F P/E of 8.2x, compared to its three-year average P/E (since IPO) of 10.0x, representing discounts of 14% and 19%, respectively.

Please refer to our detailed coverage initiation report, issued on August 3, 2024, titled “Air Link Communication (AIRLINK) – Buy: Well-Positioned to Capitalize on Rising Smartphone Sales in Pakistan,” for more details.