Pak Elektron Ltd (PEL) has done something it has seldom managed in its nearly seven decades of manufacturing: it has begun to export at scale. In March this year, the Lahore-based company shipped its first batch of distribution transformers to the United States – an inaugural consignment that caps a stream of orders worth about $44 million and puts PEL on track, by its own and analysts’ estimates, for $50 million in export sales in calendar 2025 and potentially $100 million in 2026. For a business whose fortunes have traditionally risen and fallen with Pakistan’s domestic cycles, this is a step-change: exports that could contribute roughly a fifth of group revenue next year, with export gross margins materially above what PEL earns in the local market.
The context matters. Washington has maintained steep tariffs on Chinese electrical equipment and has tightened scrutiny on supply chains crossing Mexico (and to a lesser degree Canada), even as North American utilities grapple with transmission bottlenecks and long replacement cycles. That combination has created a price and capacity gap into which a cost-competitive, compliant supplier with shorter delivery times can walk. PEL, analysts argue, has arrived with a tariff advantage – the landed duty for Pakistani shipments is set at about 19% – and with a logistical pitch built around delivery in eight to nine months, against an industry norm that can stretch to two years. For a US grid chasing a surge of building to keep pace with the voracious electricity needs of the artificial intelligence boom while replacing ageing hardware, that timing matters as much as price.
What sets the new phase apart is not just the dollar value of orders, but their quality. The export book spans units from 225 kVA up to 9,000 kVA, including higher-capacity models worth about $3 million, indicating PEL is not merely offloading low-end inventory. Margins tell the same story. Where domestic gross margins in the power division have hovered in the mid-20s (about 25–26%), exports are pencilled in at above 40%, with the blended group gross margin projected to climb from about 28.5% in CY25 towards 30% in CY27 and beyond, as exports scale to nearly one-fifth of total sales. The margin uplift is visible even in the company’s in-year progression: net margins in the power division improved from 5% in CY24 to just under 10% in the first half of CY25.
This is unusual territory for PEL. For most of its life, the company’s export line was more aspiration than anchor, susceptible to price squeezes abroad and forex shocks at home. The US transformer orders do not erase those old vulnerabilities, but they do reframe the risk-reward. If PEL delivers consistently – on quality, certifications, after-sales and timelines – the export channel could become a structural complement to its domestic base, rather than a cyclical side bet.
PEL’s journey from grid gear to fridges
PEL’s story starts in 1956, when Malik Brothers set up an electrical manufacturing shop in collaboration with Germany’s AEG. Commercial production of transformers began in 1958; air conditioners followed in 1981 as the Saigol Group, which acquired PEL in 1978, diversified the product set into consumer appliances. The company listed on the Karachi bourse (now Pakistan Stock Exchange) in 1988 and, by 1992, had secured an ABB USA licence to produce energy meters – an early signal of the technical direction that would later underpin its US pitch. A timeline of product milestones – refrigerators in 2011, inverter air conditioners in 2016, 4K smart Android TVs in 2018, semi-automatic washing machines in 2019, and the entry to the US market in 2024 – reads like the long, iterative arc of a manufacturer learning to move up the value chain while broadening its consumer footprint.
Today, PEL straddles two distinct but complementary businesses. Its power division designs and manufactures power and distribution transformers, switchgear, grid-station equipment and energy meters, and also undertakes EPC assignments. Its appliances division produces refrigerators and deep freezers, air conditioners, microwave ovens, washing machines, water dispensers and LED televisions. The split has swung between the two over cycles – pandemic-era squeezes and import controls hurt appliances, for instance – but management expects power to reclaim share as exports scale, with division revenue contributions converging again over the medium term. A product map on page 7 of the analyst note lays out the full catalogue across both divisions.
Ownership remains firmly with the founding group: the Saigol family controls about 53%, with foreign companies holding roughly 12%, financial institutions 10%, and the general public about 12%. That concentrated but diversified base has historically allowed PEL to ride out rough patches without dilutive equity raises, while leaving room for market float and institutional coverage.
In the power business, PEL claims strong domestic shares across categories: roughly 90% in power transformers (a figure that speaks to installed base and tender performance), about 17% in distribution transformers, 25% in switchgear and 18% in energy meters. Historically, that dominance has not translated into export heft, largely because global tenders favoured scale and long-standing supplier relationships. The US opening resets some of those entry barriers. Analysts estimate export revenue could reach Rs12–15 billion in CY25–26 on current order visibility, amounting to about 19% of total revenue next year. The power division’s net margin, which improved to about 9.8% in the first half, is expected to trend higher as the export mix deepens.
In appliances, PEL’s performance is tied to Pakistan’s household economics and the weather. The searing summers of recent years have pumped demand for cooling; easing inflation and better credit availability have helped, too. Appliance revenue jumped 80% to about Rs40 billion in CY24 and surged 54% year-on-year in the first half of CY25. Management and analysts now pencil in about 25% growth for CY25, led by refrigerators and air conditioners. New alliances – most notably a February 2025 tie-up with Electrolux and an April 2025 expansion with Panasonic – should bolster the range in LED TVs and premium “smart” solutions, even if licensing fees shave a sliver off margins. Refrigerators/deep freezers are at the core, ACs a growing slice, and smaller categories like water dispensers and washing machines building out the tail.
A third leg that could become material by 2026 is advanced metering. With the government planning a transition to Automated Meter Reading (AMR) meters, PEL – already licensed with all the distribution companies – has a first-mover line of sight. AMR units can be priced at almost three times traditional meters and are among the highest-margin products in the portfolio. If the policy timetable holds, meter sales could post growth of about 25%, adding another high-return stream to complement exports.
Why the US window opened – and how PEL is trying to walk through it
The trade maths are straightforward. The US has applied steep punitive tariffs on Chinese transformer imports, while supply from Mexico and Canada – the two biggest US sources – has been pinched by capacity constraints and longer lead times. Pakistan, by contrast, faces a significantly lower tariff rate of about 19% on this equipment, and PEL is offering delivery within eight to nine months, less than half the delivery time many US buyers have been quoted. The pricing room created by the tariff wedge, plus PEL’s faster timelines, add up to a compelling proposition for municipal utilities and EPC contractors staring at backlogs and grid-hardening mandates.
Of course, an orderbook is only as good as its execution. Transformers are safety-critical assets; failures are expensive and reputation-damaging. PEL’s pitch leans heavily on compliance with international standards and on total cost of ownership (TCO) rather than initial ticket price. If it can back that promise with field performance and service discipline, repeat business could compress its customer acquisition costs and soften the cyclicality that has plagued domestic tender-led sales.
The financials: where the growth – and the risks – are
The top line has already snapped back from the macro trough. Group revenue rose 37.3% year-on-year to Rs53.1 billion in CY24, led by appliances and better power-division margins. Analysts project revenue of about Rs63.9 billion in CY25 and Rs80.8 billion in CY26 as exports scale and appliances keep their momentum. The gross margin is expected to lift from 28.5% in CY25 to about 30% in CY26–27, while EBITDA margin is modelled to move into the low- to mid-20s. The earnings sensitivity is visible in the bottom line: EPS is forecast to climb to Rs4.9 in CY25 and Rs9.3 in CY26, with return on equity improving from single digits into the mid-teens. The model keeps dividends on hold in the near term as working capital absorbs cash (exports are hungry on receivables and inventory), with a potential resumption around CY28 if the balance sheet strengthens as planned.
Over the last cycle, domestic margins fluctuated with raw-material volatility and price competition. As exports rise from a trivial base to nearly a fifth of revenue, the blended margin steps higher, cushioning future cost spikes. That shift is mirrored in division-level profitability: power-division net margins have been climbing as export mix expands, while appliances settle into a steadier, mid-single-digit to low-double-digit zone depending on seasonality and pricing power.
Valuation mirrors the earnings trajectory. On forward numbers, the stock trades near 6.5 times CY26 earnings and about 5.5 times CY27, a sizeable discount to its five-year average multiple of around 12.4.
There are, inevitably, risks. The power sector at home remains a drag: cash-strapped utilities and delayed projects can sap domestic order flow. Export dependence introduces geopolitical and policy risk; a shift in US tariff policy or an easing of North American capacity bottlenecks would crimp PEL’s advantage. Appliance competition is intense – both from local assemblers and from imported brands – and consumer purchasing power remains hostage to inflation and rates.
Set against those risks are a few stabilisers. First, working-capital discipline: keeping dividends suspended while exports ramp is unpopular with income-seeking investors but prudent if receivable cycles lengthen. Second, policy tailwinds in metering: if DISCOs stick to AMR conversion timetables, the meter line could provide high-margin ballast. Third, brand and service density in appliances: the distribution map illustrates a network that can win where after-sales confidence is decisive. Finally, cost learning: repeated, time-bound export runs tend to squeeze waste out of production; if PEL turns that learning back into domestic tenders, it can defend share without sacrificing margins.
What the next 24 months could look like
On the export side, watch three data points: (1) booked vs delivered revenue (execution and milestone acceptance in the US can shift recognition), (2) repeat orders from the same counterparties (a cleaner signal of product-market fit than new-logo wins), and (3) the spread between export and domestic gross margins (to test if the >40% export margin thesis holds after freight and warranty).
In appliances, the June–September quarter will again be decisive; if refrigerators and ACs hold their gains without destructive discounting, the division could meet the 25% growth case even if consumer sentiment wobbles. The Electrolux and Panasonic partnerships will need to show up not only as shelf presence but as mix upgrades – higher average selling prices with acceptable sell-through – and as serviceable differentiation rather than badge engineering.
For meters, the story is policy and procurement. Licences from all DISCOs give PEL a head start, but AMR rollouts require funding, system integration and cyber-secure back-ends. The opportunity is substantial precisely because it is technically demanding – and because the unit economics (prices nearly 3 times legacy meters) justify the investment for both the utility and the supplier. Expect PEL to talk up this pipeline as pilots convert to framework contracts.
From local champion to export contender?
The most interesting question, strategically, is whether PEL can convert a tariff-created opening into a capability-driven moat. Tariffs come and go; delivery credibility, field performance and customer intimacy – especially in a market as exacting as US utilities – are harder to dislodge. If the company uses the next two years to bake in process certifications, strengthen design and testing, and build a small but loyal US customer set, it will have shifted its identity: no longer just Pakistan’s transformer incumbent and a mid-tier appliances brand, but a credible exporter with optionality in metering and EPC.
That, in turn, would change how investors model the company. Instead of valuing PEL as a domestic cyclical with a second engine that sputters, the market could value it as a two-engine business with counter-cyclical export earnings and secular appliance growth – both supported by improving margins.
