Karachi, September 09, 2021 (PPI-OT):VIS Credit Rating Company Limited (VIS) has maintained entity ratings of Omar Jibran Engineering Industries Limited (OJEIL) at ‘A-/A-2’ (Single A Minus/A-Two). Outlook on the rating has been revised from ‘Rating Watch-Negative’ to ‘Stable’. Long term entity rating of ‘A-’ reflects good credit quality, adequate protection factors. Risk factors may vary with possible changes in the economy. Short Term Rating of ‘A-2’ indicates good certainty of timely payment, liquidity factors and company fundamental factors are sound. Previous rating action was announced on August 06, 2021.
Revision in rating outlook captures OJEIL’s overall performance during the period under review and healthy recovery posted in financial indicators from the pandemic led weakening. Both topline and margins witnessed an improvement driven by volumetric growth, higher selling prices and lower inventory cost due to efficient procurement. Cash flows and debt coverage metrics turned positive on account of improvement in profitability. Moreover, the company is in the process of streamlining their borrowing lines which will facilitate and create room for additional financing. Leverage indicators though have depicted an improvement in the outgoing year, however, continue to remain a rating constraint.
Ratings continue to gain support from the company’s established position as a single source supplier of several critical auto parts to leading automobile and motorcycle manufacturers including Indus Motor Company (IMC), Honda Atlas Cars Limited (HAC) and Atlas Honda Limited (AHL – manufacturers of Honda brand motorcycles). Ratings also incorporate protective duty structure and existence of pass through mechanism related to raw material costs and significant exchange fluctuations. However, cyclicality in sales due to slow down in GDP growth remains a key business risk factor.
Covid-19 hit automobile sector witnessed a strong recovery period in the outgoing fiscal year on the back of sustained economic recovery, prevailing low interest rates and new models introduced in the market. The growth in demand is expected to continue with new incentives and tax benefits announced by government for auto sector along with the upsurge in auto-financing. Business risk profile of auto parts manufacturers is supported by the healthy demand outlook in auto sales, room for growth in localization levels and increased competition among car assemblers which is expected to create additional demand of auto parts to cater.
For more information, contact:
Director Compliance and Rating Analytics,
VIS Credit Rating Company Limited
VIS House, 128/C, 25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi, Pakistan
Tel: +92-21-35311861-72
Fax: +92-21-35311873
Email: bilal@jcrvis.com.pk
Website: https://www.vis.com.pk/