Press Release

VIS Maintains Entity Ratings of Omar Jibran Engineering Industries Limited
 

Karachi, September 08, 2021: 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 further information on this rating announcement, please contact Mr. Muhammad Tabish (Ext: 203) or the undersigned (Ext. 306) at 021-35311861-70 or email at info@vis.com.pk




Faryal Ahmad Faheem
Deputy CEO

Applicable Rating Criteria: Industrial Corporates (August 2021)
https://docs.vis.com.pk/docs/CorporateMethodology202108.pdf

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Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS , the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2021 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

VIS Credit Rating Company Limited