Karachi, July 07, 2022 (PPI-OT):VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Automobile Corporation of Pakistan (AUTOCOM) at ‘BBB/A-2’ (Triple B/ A-Two). Outlook on the ratings has been assigned as ‘Stable’. The medium to long-term rating of ‘BBB’ signifies adequate credit quality; protection factors are reasonable and sufficient. Risk factors are considered variable if changes occur in the economy. The short-term rating of ‘A-2’ signifies good certainty of timely payment; liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small. The previous rating was announced on April 22, 2021.
AUTOCOM is a family owned business with principal activities of the Company being the manufacture of road transport equipment such as semi-trailers, road tankers and other specialized vehicles. The Company operates out of two plans based in Port Qasim and West Wharf, Karachi. The product line of the Company comprises cargo semi-trailers for FMCGs, container chassis, coal and fertilizer semi-trailers and chemical/petroleum tankers. In addition, the Company designs and manufactures specialized vehicles (aluminium aviation refuelers, garbage compactors, and aerial works platforms for electric distribution companies). A major portion of sales revenue over the last 5 years was from the sale of petroleum tankers for OMCs. However, with the commencement of white oil pipeline project (WOPP) allowing for multi-product transportation, the Company had to adjust its sales mix in the last 18 months. Nevertheless, Company’s market positioning as well as product offering has allowed the Company to sustain its revenue growth.
Ratings take into account moderate business profile supported by strong market presence and competitive edge against other formal and informal players; however, the industry remains exposed to foreign currency risk and overall slowdown in the domestic economy.
Financial assessment indicates healthy sales revenue attributable to higher capacity utilization levels due to higher orders from the corporate segment in the ongoing year. Client concentration in the ongoing year is on the higher side with around 75% of sales mix contributed by one client Diversification in the same going forward is considered important. Net profitability profile witnessed weakening due to higher finance charges. With sizeable order base and inventory gains in 11MFY22, overall profitability profile strengthened in the period. Going forward, future profitability is contingent upon the projected growth in volumetric sales.
The risk of currency devaluation impacting profitability over the medium to long-term remains, given reliance of the Company on imports (60% imported components) and strong competitive environment. Liquidity profile of the company is considered adequate in the light of sufficient cash flows to service outstanding debt obligations. Sustainability of liquidity coverages over the rating horizon is considered important. Despite additional debt drawdown planned over the rating horizon, capitalization indicators are expected to remain sound through profit retention in equity base. Going forward, key rating sensitivities include maintenance of financial metrics in line with assigned ratings.
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/