Karachi, In a significant financial update, VIS Credit Rating Company Limited has upgraded the entity ratings of Transsion Tecno Electronics (Pvt) Limited (TTEPL) to 'A-/A-2' from 'BBB+/A-2', reflecting improved credit quality and stable economic conditions.
According to VIS Credit Rating Company Limited, the upgrade comes in the context of TTEPL's stable financial performance despite challenging economic conditions in fiscal year 2023. The medium to long-term rating of 'A-' suggests that the company maintains good credit quality with adequate protection factors, though risk factors may vary with potential economic changes. The short-term rating of 'A-2' indicates a strong likelihood of timely payment, supported by solid liquidity factors and company fundamentals.
TTEPL, incorporated in Pakistan on March 12, 2019, is a joint venture between Tecno Pack Telecom (Private) Limited and Transsion Technology Limited of Hong Kong. The company focuses on manufacturing, developing, and designing mobile phones and their accessories, serving both local and international markets.
The rating assessment also reflects the medium to high business risk profile of the mobile phone industry, which is subject to cyclicality and exchange rate fluctuations. However, TTEPL benefits from duty protection and a strong market presence, which enhances its competitive position locally. Additionally, the company has experienced stability in its financial risk profile, with an improvement in profitability and margins in FY23 helping to offset a contraction in the topline.
Despite a recovery in sales volumes in the first eight months of fiscal year 2024, TTEPL faced higher input costs, which affected margins. However, the company's capitalization profile remains robust due to its advance customer payment model, with minimal gearing and a healthy coverage profile bolstered by improving operational cash flows.
VIS notes that future rating reviews will focus on TTEPL's ability to manage its elevated leverage ratio and enhance its profitability. The maintenance of an adequate liquidity profile aligned with the assigned ratings will also be critical for future assessments.