Press Release

VIS Upgrades Entity Ratings of Mannan Shahid Forgings Limited

Karachi, May 06, 2024: VIS Credit Rating Company Limited upgrades entity ratings of Mannan Shahid Forgings Limited ('MSFL' or 'the Company') to 'A/A-2' ('Single A'/'A-Two') from ‘A-/A-2’ (‘Single A minus’/’A-Two’). Medium to long term rating of 'A' indicates good credit quality; Protection factors are adequate. 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 fundamentals are sound. Access to capital markets is good. Risk factors are small. The outlook for assigned ratings remains “Stable”. Previous Rating action was announced on May 11, 2023.

Mannan Shahid Forgings Limited was incorporated as a private limited company in 1989 and was later converted into an unquoted public limited company in 2005. The Company’s primary operations pertain to the manufacturing of forged, heat-treated, and machined components for passenger cars & trucks, agricultural tractors, motorcycles, fifth wheels and industrial conveyer system. The Company is a wholly owned subsidiary of Valley Forge (Private) Limited (VFPL) which is in turn owned by Mr. Shahid Dad (51%), Mr. Muhammad Akhtar (15%) and Mr. Shahid Ahmad Khan (0.01%), all of whom are members of the Board of Directors (BOD). The remaining shareholding is vested with family members of Mr. Shahid Ahmad Khan. The management has decided to merge VFPL into MSFL. All formalities have been completed; Lahore High Court decision is expected in June 2024.

Assigned ratings incorporate a medium business risk profile characterized by exposure to cyclicality and exchange rate volatility in the engineering segment. However, the Company's focus on exports helps mitigate many of these risks, reducing the overall impact of domestic demand fluctuations on its operations.

Rating upgrade stems from the stability in the financial risk profile of the Company amid economic conditions in FY23. The profitability profile reflects the impact of currency depreciation on sales and costs, alongside overall inflationary pressures and rising raw material costs, which constrained gross margins in FY23. Despite this, the topline was supported by export sales. The capitalization profile remains conservative, with low leverage and gearing levels. The liquidity profile is healthy, historically maintaining a high current ratio and stable cash conversion cycle. Meanwhile, the coverage profile, despite deterioration in 1HFY24, attributed to increased finance costs, remains strong and commensurate with assigned rating upgrade.

Going forward, ratings will remain sensitive to MSFL’s ability to maintain its financial metrics to be commensurate with assigned ratings.

For further information on this ratings announcement, please contact 021-35311861-64 or email info@vis.com.pk.









Applicable Rating Criteria:
Industrial Corporates
https://docs.vis.com.pk/docs/CorporateMethodology.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf

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