Press Release

VIS Upgrades Entity Ratings of Mehboob Steel Pipe Industry

Karachi, April 22, 2024: VIS Credit Rating Company Limited upgrades entity ratings of Mehboob Steel Pipe Industry ('MSPI' or ‘Mehboob’ or 'the Company') to 'BBB/A-2' ('Triple B'/'A-Two') from ‘BBB-/A-2’ (‘Triple B minus’/’A-Two’). Medium to long term rating of 'BBB' indicates adequate credit quality; protection factors are reasonable and sufficient. Risk factors are considered variable if changes occur in the economy. Short term rating of 'A-2' indicates good certainty of timely payment. Liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small. The outlook for assigned ratings have been revised from “Rating Watch – Developing” to “Stable”. Previous Rating action was announced on March 31, 2023.

Mehboob Steel Pipe Industry was incorporated in 2004 as a partnership concern. The Company imports hot rolled coils from various sources including China, Russia, and South Africa or procure it from local importers. MSPI produces steel tubes and pipes in various sizes and specifications based on market requirements. The product portfolio encompasses a range of shapes including square, elliptical, rectangular, L-type, T-type, Z-type, and D-type. These products find application primarily in the construction sector, with additional uses in water, oil & gas, automobile, furniture, housing, and scaffolding industries. The Company’s manufacturing facilities are located at Hub, Balochistan, while the registered office is situated in Lahore.

Ratings incorporate the high business risk profile of the steel pipes & tubes industry. This sector is sensitive to economic cyclicality, fluctuations in exchange parity and steel prices in the international markets. The industry faces challenges such as low-capacity utilization, revenue and profitability issues, taxation challenges, higher financing costs, rupee depreciation, and increase in energy cost. Ratings also consider the Company’s organizational structure as a partnership concern.

Rating upgrade stems from lowering of the financial risk profile of the Company. The profitability profile reflects MSPI's ability to maintain its revenue amidst economic challenges, with gross and operating margins reporting improvements despite the slowdown in economic activity. The capitalization profile is adequate, with the debt profile entirely consisting of only short-term borrowing for working capital management. Moreover, the ratings are supported by a healthy liquidity profile of the Company.

Going forward, the assigned ratings will be sensitive to MSPI’s ability to recover its coverage profile to historical levels and continue improvement in the capitalization, and profitability profile.

For further information on this ratings announcement, please contact at 021-35311861-64 or email at info@vis.com.pk.




Applicable Rating Criteria: Corporates:
https://docs.vis.com.pk/docs/CorporateMethodology.pdf

VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf

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