The battery industry in Pakistan is experiencing growing demand for energy storage solutions, particularly in the renewable energy sector. Solar batteries are gaining prominence as the government promotes renewable energy adoption. Although there is increasing demand for lithium-ion and other advanced battery technologies, lead-acid batteries still dominate the market due to cost advantages. While several companies manufacture batteries locally, significant reliance on imported raw materials persists, which can lead to price volatility, especially with exchange rate fluctuations. The market is competitive, with price-sensitive consumers. Established companies like Exide and AGS benefit from strong brand loyalty, but newer entrants like Treet Battery are focusing on cost competitiveness and innovation to capture market share.
Treet Battery Limited, a division of the well-known Treet Corporation, entered Pakistan’s battery manufacturing industry with a focus on high-quality lead-acid batteries. Leveraging its parent company’s established reputation in various industries, Treet Battery aims to expand its presence in the automotive and energy storage sectors. The company primarily manufactures batteries for automobiles, including cars, motorcycles, and trucks, as well as batteries for backup power systems and renewable energy storage.
Treet Battery Limited (PSX: TBL) was listed on the Pakistan Stock Exchange (PSX) in December 2023. This listing follows the successful de-merger and bifurcation of the Battery Division from First Treet Manufacturing Modaraba (FTMM), a listed entity on the exchange.
As a relatively new player among well-established brands, especially in the lead-acid battery segment, Treet Battery faces experienced competitors. However, despite being a newer entrant, Treet Battery is positioning itself as an innovator with plans to expand its product range and market share. The company’s key product, Daewoo Batteries, is disrupting the battery landscape by directly competing with established brands, offering consumers a wider selection of high-quality products at competitive prices. Daewoo Batteries has been the pioneer in offering maintenance-free batteries. This innovation has since pushed all major battery manufacturers in the country to invest heavily in maintenance-free technology, also commonly called dry batteries. Not only are they pre-charged, making them convenient and quick for installation, they are long-lasting and require minimal upkeep with no need for regular water refills like conventional batteries.
A key component of its growth strategy is a commitment to quality, technological innovation, and sustainability, as the company looks to capitalize on the increasing demand for energy storage solutions in Pakistan’s growing renewable energy sector. Treet also prioritizes environmental concerns by investing in eco-friendly production processes and recycling initiatives for lead-acid batteries.
Financial Performance
Since launching Daewoo Battery products in 2019, Treet Battery has established a notable market presence, recognized for its reliability and performance. FY24 presented significant challenges, including high financing costs and reduced demand in the backup energy storage segment due to improved grid reliability. Rising inflation and logistical delays added further pressure. Despite these obstacles, TBL focused on cost-saving initiatives and operational efficiencies, which helped mitigate these impacts, reflecting the company’s adaptability in a dynamic environment.
Despite slower growth than in previous years due to economic pressures, TBL’s revenue grew by 6 percent in FY24 due to strong product demand and strategic partnerships. Gross profit rose by 28 percent, supported by operational efficiencies and cost control measures.
Operating profit grew by 41 percent in FY24 due to product premiumization, improved equipment efficiency, and strategic cost-saving initiatives. The company launched two new products: the DS100, a solar-specific battery for growing solar markets, and the DLS70, designed for high-performance vehicles. Treet also expanded its OEM partnerships, forming new alliances with leading auto assemblers.
The company’s finance costs increased significantly by 52 percent due to rising interest rates and debt obligations, impacting overall profitability and resulting in a net loss. Despite the net loss, TBL improved its gross profit margin from 16 percent to 20 percent and its operating profit margin from 7 percent to 10 percent, demonstrating strong internal efficiencies.
Overall, TBL maintained its revenue growth trajectory and strengthened its operational foundation despite external financial challenges, with a focus on sustaining profitability in the coming years.
Peer Analysis
In comparison to its competitors, TBL’s gross profit (GP) margin outperformed, highlighting superior operational efficiency even in a challenging environment. TBL’s strategic focus on selling high-margin products has yielded positive results, contributing to this success. TBL’s administrative costs were significantly lower than those of competitors, demonstrating effective cost management and efficient resource allocation. However, TBL’s selling expenses relative to sales were approximately 6 percent in FY24, compared to 4 percent and 3 percent for AGS and Exide. This difference is primarily due to warranty costs, as TBL offers a one-year warranty on backup batteries, while competitors provide only six months. While TBL remains operationally more efficient than AGS, Exide’s profitability is higher due to larger sales volumes and lower warranty expenses. Despite competing against industry giants, TBL’s operational performance is strong across key areas.
Overall, AGS shows the highest revenue, while TBL demonstrates agility through strategic cost management. Exide also displays substantial profitability with its increased revenue and gross profit.
A major factor impacting TBL’s bottom line is its high leverage cost, currently at 14.5 percent, compared to competitors, who benefit from significantly lower debt levels (AGS and Exide’s leverage costs are around 3.3 percent to 3.9 percent). This difference in debt structure adds pressure to TBL’s financial performance.
However, TBL maintains a highly competitive cash conversion cycle (CCC) and excels in managing operational working capital, which positively contributes to its overall liquidity and operational efficiency compared to others in the industry.
In terms of year-on-year changes in trade receivables, Exide and AGS have seen a noticeable increase of around 26–28 percent, while TBL’s rate has remained relatively flat. This suggests that TBL is receiving its payments more quickly, as evidenced by its lower Days Sales Outstanding ratio among the three competitors. Conversely, AGS has extended an additional Rs 1 billion in market credit to sustain their turnover in absolute terms, implying that their volumes may have declined in response to overall market price increases.
For example, despite TBL’s sales being about one-fifth of AGS’s, its Days Payable Outstanding ratio, which is comparable to its larger peers, highlights TBL’s superior working capital management.
TBL also has a lower Days Inventory Outstanding compared to its peers. While this demonstrates efficient working capital management, it also indicates that, with lower inventory levels, TBL may be less equipped to quickly respond to short-term volume opportunities as the company opts to carry less stock.
Future Prospects
Treet Battery Limited’s future plans and opportunities emphasize strategic focus areas aimed at driving growth and sustaining market presence. TBL anticipates a favorable economic climate, with inflation reducing to single digits (9.6 percent) and stable currency rates.
The company aims to optimize its capital structure by reducing debt to manage finance costs better. Lower interest rates will support this goal, paving the way for financial stability. TBL also prioritizes maintaining high operational standards to enhance profitability, with efforts directed toward efficient resource management to sustain its operating margin.
Already a pioneer in dry batteries, innovation remains the company’s core focus, with TBL dedicated to advancing energy storage technologies and expanding its battery product line for various applications, including solar and high-performance automotive needs. As the demand for renewable energy solutions rises, the company remains committed to addressing sustainability concerns by improving environmentally friendly product offerings, including batteries for hybrid solar systems.
These strategic initiatives position Treet Battery Limited to leverage operational and financial strengths, navigate economic changes, and drive sustainable growth.
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