Treet Corporation Limited (PSX: TREET) has delivered a robust financial performance, marked by strategic initiatives aimed at leveraging improving economic conditions. However, several critical challenges and risks must be considered alongside these positive developments.
During 1HFY25, TREET posted an unconsolidated topline of Rs6.5 billion, representing a 16 percent year-over-year increase compared to Rs5.6 billion in 1HFY24, driven primarily by a 22 percent YoY increase in prices. Earnings for the period significantly rebounded to Rs647 million from a loss of Rs206 million during 1HFY24, buoyed by a notable profit of Rs594 million from the sale of shares in Treet Battery Ltd. (TBL). Following this divestment, the company’s holding in TBL now stands at approximately 82-83 percent.
Economic indicators indeed point to recovery, resulting in heightened consumption and a favorable investment climate, positively impacting the battery industry. The automotive segment has notably benefited from declining financing rates, prompting increased vehicle sales and thus boosting demand for vehicle batteries.
Passenger car sales alone rose 51.3 percent during the first half of FY2025, reaching 46,398 units due to surging remittances and lower interest rates. While Treet’s Daewoo maintenance-free vehicle batteries, employing advanced Korean technology, appear strategically aligned with these growth trends, sustaining competitive advantage amidst heightened industry rivalry remains critical.
TBL specifically reported revenues of Rs4.2 billion, marking a 16 percent YoY increase driven by a significant 22 percent rise in sales volume, reaching 350,000 units. Management is also exploring entry into the Lithium-Ion battery market, pending the results of an ongoing feasibility study. Additionally, with decreasing net metering buyback rates, the company expects growing demand for backup-based solar setups, identifying solar energy as a promising growth avenue.
Moreover, demand for backup power solutions is projected to grow in the second half of FY2025 due to historically higher temperatures and limited grid reliability. Although Treet Batteries has sufficient spare capacity and advanced manufacturing facilities, maintaining high-quality products and reliable after-sales service remains vital for market share expansion.
Internationally, Treet’s export strategy, covering 40 countries—including key markets such as China, Saudi Arabia, and Africa—is strengthened by its recent establishment of physical presence in the Middle East, complemented by an impending warehousing agreement. However, geopolitical tensions and global economic volatility necessitate careful management and strategic flexibility.
Treet’s pharmaceutical subsidiary, Renacon, also exhibited robust growth, recording revenues of Rs801 million in 1HFY25, up 24 percent YoY from Rs643 million in the previous year. This growth was fueled by a 17 percent increase in sales volume and a 6.4 percent increase in average unit prices. Renacon maintains a dominant market share (60-65 percent) in dialysis solutions locally and charges premium pricing compared to competitors. Nevertheless, profitability is anticipated to experience short-term pressure due to borrowing costs associated with the new production facility. Furthermore, Renacon aims to boost the international market presence by registering dialysis solutions in 10 countries.
Financially, Treet Batteries holds impressive gross margins and an efficient cash conversion cycle relative to competitors, but maintaining this performance amid fluctuating input costs and potential supply chain disruptions presents ongoing challenges. Additionally, while Treet’s product diversification into shaving foam and disposable razors highlights strategic intent, penetrating new markets and maintaining brand loyalty will demand careful execution.
Given these promising yet challenging developments, will Treet Corporation Limited effectively adapt to shifting market dynamics and competitive pressures to secure its future growth? Time will tell.
Comments
Comments are closed.