Press Release

VIS Assigns Initial Entity Ratings to Master Changan Motors Limited

Karachi, October 29, 2021: VIS Credit Rating Company Limited (VIS) has assigned initial entity ratings of ‘A-/A-2’ (Single A Minus/A-Two) to Master Changan Motors Limited (MCML). The medium to long-term rating of ‘A-’ denotes good credit quality with adequate protection factors. Risk factors may vary with possible changes in the economy. The short-term rating of ‘A-2’ denotes good certainty of timely payments coupled with sound liquidity and company fundamentals. Risk factors are small. Outlook on the assigned ratings is ‘Stable’.

MCML is principally engaged in the assembly and progressive manufacturing and sale of pickups and vans, passenger cars, and trucks. The assigned ratings incorporate MCML’s affiliation with experienced and sound sponsors - Master Motor Corporation (Private) Limited (MMCL) and Changan Automobile Investment (Shenzhan) Corporation Limited (Changan). Changan is one of China’s leading state-owned enterprises with international presence, while MMCL is part of well-diversified Master Group of Companies which has presence in mattresses & upholstery, home fashion, textile, chemical, power, automobile and auto part sectors. Ratings also encapsulate positive momentum in the automobile sector experienced in the post pandemic recovery period along with strong projected growth in goods and passenger logistics. However, the industry remains exposed to changes in the economic environment; risks manifesting from developments including rupee devaluation, changes in interest rates, IMF program, and geo-political situation. Business risk profile is further supported through diversification and broad product base from van, pickup, sedan, and to-be launched SUV segment. The range of offerings provides competitive strength to the company.

Ratings incorporate significant revenue growth during FY21 driven by higher unit sales of pickup and vans along with uptick in passenger car sales. Gross margins depicted improvement on account of changes in sales mix with vans being the highest contributor, relative to prior years. However, operating margins remained constrained due to higher marketing and sales commission expenses, and significant increase in international freight charges on new materials. Finance costs reduced during the outgoing year on account of lower interest rates, supporting the net margins. Consequently, cash flow coverage and debt servicing has improved on a timeline basis. Significant growth in customer advances, reflecting strong demand dynamics, supported sound liquidity. However, high level of customer advances pushed up the leverage while gearing remained within manageable levels. Ratings are dependent upon projected growth in turnover with significant decrease in gearing and leverage levels, going forward.

For further information on this rating announcement, please contact Ms. Sara Ahmed (Ext: 207) or the undersigned (Ext. 201) at 021-35311861-70 or email at

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