Press Release

VIS Assigns Positive Outlook to Entity Ratings of Hi-Tech Lubricants Limited
 

Karachi, December 03, 2021: VIS Credit Rating Company Limited (VIS) has maintained the entity ratings of Hi-Tech Lubricants Limited (HTL) at ‘A/A-2’ (Single A/A-Two). The medium to long-term rating of ‘A’ denotes good credit quality, with adequate protection factors. Moreover, risk factors may vary with possible changes in the economy. The short-term rating of ‘A-2’ denotes good certainty of timely payment coupled with sound company fundamental and liquidity factors. Outlook on the assigned rating has been revised from ‘Stable’ to ‘Positive’. The previous rating action was announced on December 30, 2020.

The assigned ratings incorporate moderate business risk profile of the company underpinned by relatively favorable competitive landscape of the sector post recovery in international oil prices and gradual improvement in the overall macroeconomic environment. Ratings also factor in multipronged revenue stream owing to initiation of operations of oil marketing company (OMC). The ratings draw comfort from shift in business model with majority of product procurement transferred to subsidiary- Hi-Tech Blending (Pvt) Limited (HTBL) leading to cost rationalization reduced import dependence, mitigation of foreign exchange risk and improved cash conversion cycle. Moreover, during FY21 the company has franchised its Express Centers in Lahore, Karachi and Rawalpindi and earns rental income on the same.

Revision in rating outlook is reflective of improvement in the financial risk profile supported by positive momentum in earnings, improved margins and liquidity indicators and conservative capital structure. Growth in sales revenue during the outgoing year was largely on the back of sizeable increase in OMC segment sales. Assigned ratings incorporates the re-design in supply chain through implementation of handler model whereby cost of carrying inventory was transferred to the handlers; consequently requiring lower financing requirements reducing finance costs. Short-term investments in the equity market and mutual funds provides additional liquidity cushion. However, with gradual utilization of IPO proceeds for expansion in storage capacities, investment portfolio is projected to decline. Financial performance of the company is expected to be facilitated by the expansion of OMC operations and establishment of exclusive agreements with automobile manufacturers in the country. The ratings will remain dependent on improvement of market position, maintenance of leverage and liquidity indicators at current levels, and the augmentation of topline, as plans to generate incremental revenues from OMC operations and sale of lubricants are materialized.

For further information on this rating announcement, please contact Ms. Asfia Aziz and/or the undersigned at 021-35311861-66 (Ext. 306) or email at info@vis.com.pk.



Faryal Ahmad Faheem
Deputy CEO

Applicable rating criterion: 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 .

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