Press Release
JCR-VIS assigns Initial Ratings of Omar Jibran Engineering Industries Limited
Karachi, July 06, 2017: JCR-VIS Credit Rating Company Limited (JCR-VIS) has assigned initial ratings of Omar Jibran Engineering Industries Limited (OJEIL) at ‘A-/A-2’ (Single A Minus/A-Two). Outlook on the assigned ratings is ‘Stable’.
The assigned ratings to OJEIL incorporates company’s position as the single source supplier of several critical auto parts to leading automobile and motorcycle manufacturers, sound business risk profile underpinned by growing demand for cars and motorcycles, protective duty structure and raw material & exchange rate fluctuation pass through mechanism in place with clients. While improving on a timeline basis, projected strengthening of liquidity profile and reduction in leverage indicators are additional rating drivers. Ratings could be constrained by adverse changes in operating environment and duty structure on raw & finished products; as per management, changes are unlikely during the term of the recently announced Automobile Policy.
OJEIL has a long-term, spanning over 27 years, association with major automobile and motorcycle manufacturers. As per management, focus on quality and reliability has facilitated in forging this lengthy relationship. Range of products that OJEIL supplies are used in fulfilling new as well as replacement demand. We understand that client concentration is a function of single source supply characteristic in the industry.
Net sales of the company have increased at a CAGR of 11.4% over the last 5 years (FY11-FY16) on account of healthy increase in car/motorcycle sales of major customers. Given the planned introduction of new models, steady demand for sales growth from existing players and entry of new players, sales are projected to increase at a CAGR of 15% over the next 5 years.
Going forward, profitability is projected to grow on account of margin improvement as volumetric sales increase while other income from toll manufacturing in company owned Adam Motor Company assembly plant is further supporting the bottom line. Ratings are underpinned by a planned Initial Public Offer (IPO), on June 30th 2017 accounts, leading to increased profitability and reduced leverage indicators. A delay in planned IPO may impact ratings.
For further information on this rating announcement, please contact the undersigned (Ext: 201) at 35311861-70 or fax to 35311872.
Javed Callea
Advisor
Applicable Criteria: Industrial Corporates (May 2016)
http://www.jcrvis.com.pk/docs/Corporate-Methodology-201605.pdf