Press Release

VIS Revises Entity Rating of Omar Jibran Engineering Industries Limited

Lahore, February 19, 2024: VIS Credit Rating Company Limited (VIS) has revised the medium to long-term entity rating of Omar Jibran Engineering Industries Limited (OJEIL) from ‘A-’ (Single A Minus) to ‘BBB+’ (Triple B Plus) while maintaining the short-term rating at ‘A-2’ (A-Two). The medium to long term rating of ‘BBB+’ signifies adequate credit quality, protection factors are reasonable and sufficient. Risk factors are considered variable if changes occur in the economy. Short term ratings of ‘A-2’ denotes good certainty of timely payment. Liquidity factors and company fundamentals are sound. Risk factors are small. The outlook on the assigned ratings has been revised from ‘Negative’ to ‘Stable’. Previous rating action was announced on November 17, 2022.

Ratings continue to gain support from the company’s established position as a single source supplier of several critical auto parts to leading automobile and motorcycle manufacturers including Indus Motor Company Limited, Honda Atlas Cars Pakistan Limited and Atlas Honda Limited. Revision in assigned ratings captures significant demand slowdown in the automobile industry in view of the weak economic fundamentals of the country and its impact on financial risk of the company with trailing margins, continued losses, lower equity and increasing debt profile.

A decreasing trend was witnessed in gross margins on a timeline basis. Higher average borrowings and increase in policy rate resulted in higher financial charges. Given lower net sales, lower gross margins and higher financial charges, OJEIL recorded a loss during FY23 and HY24. Given decrease in FFO, on account of lower profitability from core operations, debt coverages were impacted. Gearing and debt leverage increased on account of increase in borrowings and lower equity base. Leverage indicators are projected to increase slightly by end-FY24 and decrease in subsequent years, moving forward. The ratings would remain sensitive to improvement in overall business and financial risk profile of the company.

For further information on this rating announcement, please contact the undersigned at 042-35723411-12 (8008) or email at info@vis.com.pk








Maimoon Rasheed
Director


Applicable Rating Criteria: Industrial Corporates (May 2023)
https://docs.vis.com.pk/docs/CorporateMethodology.pdf

VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf

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 February 19, 2024 VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to VIS.