Press Release

VIS Maintains Entity Ratings of Procon Engineering Private Limited
 

Karachi, October 21th, 2021: VIS Credit Rating Company Limited (VIS) has maintained entity ratings of Procon Engineering (Pvt.) Limited (PEPL) at ‘A/A-2’ (Single A /A-Two). Outlook on the ratings 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 May 21, 2020.

Revision in rating outlook takes into account PEPL’s strong recovery from the pandemic led weakening. PEPL posted significant growth in revenues in FY21 on the back of volumetric growth in sales. Gross margins of the company inched upwards on account of higher product prices. Profitability was further supported by reduced financial costs and income emanating from recognition of share of profit from associates. Resultantly, cash flows and debt coverage metrics stood strong. Moreover, the company diversified into foaming and synthetic business in 2020, which resulted in higher capital expenditure. Further capacity expansion is underway within auto part segment to cater to growing auto demand. Leverage indicators consequently increased and are expected to remain higher, albeit manageable supported by higher projected profits. Going forward, maintaining leverage indicators in line with assigned ratings will be important.

Ratings continue to gain support from strong sponsor profile and company’s established position as a leading supplier of automotive parts to leading automobile, motorcycle and tractor manufacturers. However, cyclicality in auto sales remains a key business risk factor, although diversification into foaming and synthetic businesses will provide support to revenues of the company. The growth in auto demand is expected to continue with new incentives and tax benefits announced by government for the sector. Business risk profile of auto parts manufacturers is supported by the healthy demand outlook in auto sales.

For further information on this rating announcement, please contact Ms. Sara Ahmed (Ext: 207) or the undersigned (Ext. 306) at 021-35311861-70 or email at info@vis.com.pk




Javed Callea
Advisor

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

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