Press Release

VIS Upgrades Entity Ratings of Transsion Tecno Electronics (Pvt) Limited

Karachi, April 19, 2024: VIS Credit Rating Company Limited upgrades entity ratings of Transsion Tecno Electronics (Pvt) Limited ('TTEPL' or 'the Company') to 'A-/A-2' ('Single A minus'/'A-Two') from ‘BBB+/A-2’ (‘Triple B plus’/’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 June 16, 2023.

Transsion Tecno Electronics (Private) Limited (‘TTEPL’ or ‘the Company’) is a company incorporated in Pakistan as a private limited company under the Companies Act, 2017 on 12 March 2019. The Company’s main area of operations is manufacturing, development and designing of mobile phones and their accessories to cater local as well as international markets. The Company is a joint venture between Tecno Pack Telecom (Private) Limited (The Holding Company) and Transsion Technology Limited, a company duly incorporated under the laws of Hong Kong having registered office at Room 604, 6F South Tower, World Finance Centre, Harbour City, 17 Canton Road, Tsim Sha Tsui, Kowloon, Hong Kong.

Assigned ratings incorporate the medium to high business risk profile of the mobile phone industry, marked by significant exposure to cyclicality and exchange rate fluctuations. Moreover, moderate competition among top players and low regulatory risk contribute further to the industry's risk profile. Duty protection in the form of additional customs and regulatory duties provides price advantage to local players. The Company benefits from a strong market presence, which supports the assigned ratings.

Rating upgrade stems from the stability in the financial risk profile of the Company amid economic conditions in FY23. The profitability profile remained stable with improvement in margins in FY23 which offset the impact of contraction in the topline. The Company witnessed an improvement in gross margins due to inventory gains. In 8MFY24, although sales volumes have recovered, margins deteriorated as newer inventory translated into higher input costs. The capitalization profile reflects high leverage attributed to the nature of TTEPL’s advance customer payment model, albeit minimal gearing, Meanwhile, the coverage profile remains healthy, supported by minimal obligations and improving operational cash flows. Additionally, the Company maintains an adequate liquidity profile, commensurate with assigned ratings.

Going forward, ratings will remain sensitive to the Company’s ability to improve its capitalization profile, specifically its elevated leverage ratio, while further enhancing its profitability profile. Moreover, maintenance of the liquidity profile to be commensurate with assigned ratings will also be an important consideration for future reviews.

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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