Lahore, January 19, 2022 (PPI-OT):Car dealership (authorized) hinges on the robustness of principal (auto/ manufacturer, assembler). The strength of car dealer is contingent to the relatively positioning of principal in the respective market. There is a pre-set qualitative and quantitative criterion – imposed by principal on the dealer’s network. The rating takes comfort from Toyota Jinnah’s alliance to Indus Motor Company – owned by Habib Group, Toyota Motor Corporation and Toyota Tsusho Corporation. Toyota Jinnah Motors (TJM) holds 4S car dealership. Over the period of time TJM has built a sustainable position in the competitive industry of Pakistan. TJM’s income streams derived from sales of new vehicles (40%) and after sales services (60%). The profitability is being supplemented by the ‘After Sale’ segment reporting net profitability for the dealership and covering its operational cost.
Hence limiting and/or cushioning the unforeseen drag on the risk absorption capacity. As compared to FY20 in which auto industry had been badly affected by the pandemic Covid-19, FY21 saw a pickup in overall economic activity resulting in higher demand for automobiles. Pakistan’s vehicle market in FY21 keeps rising. Brand wise, Toyota gained the second position in terms of growth in IQFY22. However, the impact of interest rate and increased advance tax on auto sector is yet to be unfold for future prospects. The Company has also received benefits under the new leadership and of sponsors’ experience and abilities.
The financial risk profile of Toyota Jinnah Motors is adequate. Company has substantially reduced its long-term borrowings from financial institutions through sponsors’ support and through internally generated cashflows in the review period. The ratings are dependent on the management’s ability to sustain its business profile while benefiting from positive demand fundamentals, financial discipline/transparency is crucial. Moreover, strengthening of governance framework is pivotal for any growing business concern.
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Analyst,
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Lahore, Pakistan
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Email: hammad.rashid@pacra.com
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