Lahore, April 25, 2022 (PPI-OT):Diamond Tyres Limited (“Diamond Tyres” or the “Company”) has a reputable presence in 2 and 3 wheelers industry since long. Being a volume driven plus price sensitive industry, the competition is tough. Diamond Tyres has demonstrated resilience in the competitive environment and achieved footprint as a prominent player in its respective niche. Over the years the company has progressed both in terms of financial aspects and operational level, by enhancing its product range of offering within the tyre and tubes domains. Given the industry dynamics, innovation and advancement has become inevitable.
Aiming for growth, the Company is eyeing to increase its market share in replacement market by adding more flares to its existing product palette. Capacity utilization is gradually pacing up and this will reap benefits in the future and shall boost up revenues and margins, deriving strength to the financial matrices. Revenue stream is dominated towards replacement market (RM) followed by sales to OEM’s and exports. Going forward the Company has plans to beef up their export sales stay more competitive and diversified in the market owing to the situation where local 2 and 3 Wheelers tyres segment is saturated.
Currently company’s profitability has been restricted on account of continuous increase in input costs on the back of rupee depreciation and global inflationary pressure. The Company has implemented sound system of internal controls along with recently developed internal audit function. Financial risk profile of the Company appears adequate with comfortable coverages and cashflows, working capital cycle of the Company is stretched and depicts industry norms. Capital structure is leveraged where borrowings are comprising of long-term and short-term to support BMR and working capital requirement.
The Company operates under the umbrella of Diamond Group of Industries, which comprises five other companies and constitutes renowned names; Diamond Supreme Foam, Dolce’ Vita and Diamond Jumbolon, reflecting good financial backing. Both businesses (foam and tyre) are cyclical in nature hence, corroborating continuous inflows at group level. The subsequent generations of sponsoring family are the joint owners of the business. The group entails a central treasury and financial management system where decision making is held mutually. Company’s corporate governance framework needs to be strengthened. The management is mindful of the essence of corporate structure and is keen towards change for the better. This lends support to ratings.
The ratings are dependent on management’s ability to sustain its growth in revenues, margins and profitability. Prudent management of the working capital, maintaining sufficient cash flows and coverages is imperative. Improvement in governance structure remains important for the ratings.
For more information, contact:
Analyst,
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore, Pakistan
Tel: +92-42-5869504-6
Fax: +92-42-5830425
Email: hammad.rashid@pacra.com
Website: www.pacra.com