Lucky Group to setup Samsung mobile phone assembly plant in Pakistan

KARACHI: Lucky Cement (LUCK) has said that its subsidiary Lucky Motor Corporation (LMC) has entered into an agreement with Samsung Gulf Electronics (a South Korea based company) for producing Samsung mobile devices in Pakistan, said a company notice at PSX website.

Rumors of the above had been in the market for the past couple of weeks, however it has now been confirmed by the company through the notice to the exchange.

LUCK owns 71.55% of LMC, and expectations are high for this latest venture as LUCK has been hugely successful with its recent initiatives like (1) bringing KIA (another South Korea based company) to Pakistan to assemble automobiles and (2) acquisition and then the turnaround of ICI Pakistan (ICI), amongst others.

Samsung had setup an assembly plant in Bangladesh in 2018, which has been termed a huge success. Samsung is presently producing 95% of the Samsung phones sold in Bangladesh, with production of around 2.5 million units annually.

The annual Pakistan handset market size is estimated at 45 million units with around 32 million units being imported and 13 million units being manufactured locally in the country. Of the 28 million mobile sets imported in Pakistan during 2019, around 1.54 million units were of Samsung (5.5% of the units imported and 15-20% in terms of value of imports).

In terms of value, the market size of mobile sets in Pakistan is estimated at $2.5 billion, based on imports data provided by Pakistan Bureau of Statistics (PBS).

The investment size is rumored to be around US$100mn (Rs16.5bn), where we believe cash requirement for the investment is not a major concern. LMC is expected to generate an average EBITDA/year of Rs 15 billion over next two years from its auto assembly plant.

The production facility is expected to be completed by end of Dec-2021. Our back of the envelope working suggest that the venture can generate annual revenue of around $300-600 million. The analyst expects project can make net profits of Rs 1.0-1.5 billion in its early years.

The government is also providing duty protection to the industry though its Mobile Device Manufacturing Policy, which can potentially reduce prices of locally manufactured sets by up to 50%. The plant will be setup in a Special Economic Zone, which will provide tax exemption to the venture.

We have seen in other countries like Vietnam and Bangladesh, that Samsung looks to expand its portfolio after initially setting up a mobile phone assembly plant.

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