Karachi, VIS Credit Rating Company Limited has raised the entity ratings of Mannan Shahid Forgings Limited (MSFL) to 'A/A-2' from 'A-/A-2', signaling a positive adjustment in the company's credit quality amidst stable economic conditions. This revision reflects a robust financial profile and the effective management of risks associated with the cyclicality of the engineering sector.

According to VIS Credit Rating Company Limited, the upgrade was influenced by the stability in MSFL's financial risk profile during the fiscal year 2023, despite challenges such as currency depreciation and inflationary pressures. The company has demonstrated solid performance, particularly in its export operations, which have bolstered revenue amidst fluctuating domestic demand.

Mannan Shahid Forgings, established in 1989 and transitioning to a public unquoted company in 2005, specializes in manufacturing forged, heat-treated, and machined components for various industrial applications. The company is a subsidiary of Valley Forge (Private) Limited, which is undergoing a merger into MSFL, pending a decision from the Lahore High Court expected in June 2024.

The assigned ratings also consider the company’s conservative capitalization and healthy liquidity profile, which have supported its ability to cope with economic pressures and maintain a high current ratio and stable cash conversion cycle. However, the company did face some pressures in the first half of FY24, particularly with rising finance costs, although its coverage profile remains strong.

Going forward, the stability of MSFL’s ratings will depend on its continued ability to manage financial metrics in line with the levels expected by the ratings agency.