Press Release

VIS Assigns Initial Ratings to Master Motor Corporation (Private) Limited

Karachi, October 28, 2021: VIS Credit Rating Company Limited (VIS) has assigned initial entity ratings of Master Motor Corporation (Private) Limited (MMCL) at ‘A/A-2’ (Single A /A-Two). Outlook on the assigned rating is ‘Stable’. The long term rating of ‘A’ signifies good credit quality; Protection factors are adequate. Risk factors may vary with possible changes 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.

Master Motor Corporation (Private) Limited is primarily engaged in the assembly, progressive manufacturing, and sale of trucks and buses in Pakistan. The company is the sole provider of Yutong, Foton, Fuso, and Changan brands to the domestic industry which are leading names in the international markets. MMCL also has a sizeable investment stake in subsidiary company, Master Changan Motors Limited (MCML), which is a joint venture between the company and Changan Automobile Investment (Shenzhen) Corporation Limited (Changan).

Ratings take into account the diversified sponsor profile of Master Group of Companies which provides strength to the company. Group support has been evident through timely financial assistance extended to the company amid pandemic slowdown. Assigned ratings also encapsulates positive outlook on the automobile industry in Pakistan based on macroeconomic recovery post-pandemic along with projected growth in goods and passenger logistics. However, industry remains exposed to key risks manifesting the short-run economic developments including interest rate environment, consistent rupee devaluation since end-FY21, IMF program, and geo-political situation. MMCL has been able to capture a sizable market share in both the truck and bus segments during FY21, placing the company in a leading position. However, sustainability of market shares remains a key risk as we expect competitive pressures to increase in the medium term.

The assigned ratings to MMCL incorporate healthy revenue growth and gross margin uptick driven by increase in volumes and unit prices, which led to improvement in operating margins despite increase in expenses on account of higher freight charges globally. Net margin improvement was facilitated by decrease in finance costs due to lower short term borrowings and decrease in interest rates during FY21. Consequently, cash flow coverage indicators and debt servicing are strong. Working capital cycle exhibit improvement on account of strong demand and higher customer advances resulting in healthy cash balances at end-FY21. Overall, liquidity profile remains satisfactory. Capitalization indicators depict an improving trend on a timeline basis. Revenues and profitability are projected to grow over the rating horizon. Achievement of projected growth and margins, while maintaining leverage and gearing at lower levels will be important for maintenance of assigned ratings.

For further information on this rating announcement, please contact the undersigned (Ext: 201) or Ms. Sara Ahmed (Ext: 207) at 021-35311861-71 or fax to 021-35311872-3.

Javed Callea

Applicable Rating Criteria: Industrial Corporates (August 2021)

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