Karachi: VIS Credit Rating Company Limited has maintained the entity ratings of The Imperial Electric Company Pvt Ltd at A-/A2, reflecting its good credit quality and strong likelihood of timely repayment of short-term obligations. However, the outlook on the ratings has been revised from 'Positive' to 'Stable'. The previous rating action was announced on January 31, 2024.
According to a statement by VIS Credit Rating Company Limited, The Imperial Electric Company, based in Lahore, specializes in the production and installation of diesel generators and offers after-sale services. The company also provides low-voltage electrical components, lighting products, and airfield lighting systems for the aviation industry.
The firm has a significant presence in the industry due to its comprehensive electrical solutions. The ratings account for the company's strong market presence and competition levels within the local industry and with imported Chinese products. IEC's expansion into the solar segment further enhances its competitive profile.
In the fiscal year 2024, IEC achieved an 8% year-on-year growth in net sales, driven by easing import restrictions and improved component availability. The company's healthy order book, valued at PKR 5 billion, includes major projects with airports in Lahore and Karachi and defense contracts. IEC expects a 25-30% sales growth in fiscal year 2025.
The firm's gross margins reached 28.9% in FY24, with net margins improving to 12.1%, supported by a better sales mix and operational efficiencies. Although margins dipped slightly in the first half of FY25 due to higher costs, they remained above FY23 levels.
IEC reported adequate liquidity in FY24, with a current ratio improving to 2.86x. However, profitability declined during the first half of FY25, placing pressure on liquidity. This led to a revision in the ratings outlook. The company has reduced reliance on short-term debt, with improved gearing and leverage ratios by the end of 1HFY25.
Moving forward, improvement in cash flows and debt coverage amid expected revenue increase will be crucial for the assigned ratings.