Lahore, October 25, 2021 (PPI-OT):Ghandhara Industries Limited (GIL) has been one of the top leading automobile companies in Pakistan. Its product lines include trucks (light-duty, medium-duty and heavy-duty) buses, and D-MAX pick up. The strength of the company is its alliance with ISUZU – a leading Japanese brand in the country’s trucks and buses segment. ISUZU has enabled the company to build a strong fortress in the competitive industry of Pakistan. FY21 has been a ‘recovery period’ for the auto sector. The buying interest among consumers revived after the reopening of markets in June 2020 as trucks sales soared by 20%, followed by 17% in buses, and 57% in pickups. Ghandhara Industries Limited has managed to translate the same in its top-line and achieve revenue growth of 27% in FY21.
Further, the company’s sales registered uptick as interest rates were supportive, hence strengthening auto financing. Bottom-line growth of the company is a resultant of improved gross margins for the period under review. Company’s exposure to more advances has proved to be beneficial as business relies less on borrowed capital to fuel growth and other initiatives. There has been a considerable boost in company’s cash flows from operations, thus bolstering coverages position. Over the years, company has been able to sustain its position in domestic automotive sector while managing uprising competition and secured high market share.
The sponsoring group built synergies between the associated companies operating in the auto sector. The sponsoring group upholds good corporate governance standards. Their business acumen is further enriched by the group’s stake in the country’s leading tyre manufacturing company. During June 2021, finer working capital and reduced borrowings along with the low finance cost elevated the financial strength of the company. The capital structure remains moderately leveraged mainly comprising short-term borrowings.
The ratings are dependent on upholding of the company’s business as well as financial risk profile. Improvement in margins and intact coverages are imperative. Key element is company’s stance on working capital management. Moreover, management’s ability to sustain its market share during the demand crunch is crucial.
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Analyst,
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore, Pakistan
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Email: hammad.rashid@pacra.com
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