Press Release
VIS Maintains Entity Ratings of Procon Engineering (Pvt.) Ltd.
Lahore, May 22, 2024: VIS Credit Rating Company Limited (VIS) has maintained the entity ratings of Procon Engineering (Pvt.) Limited (‘PEPL’ or ‘the Company’) at ‘A/A-2’ (Single A /A-Two). The medium to long-term entity rating of ‘A’ reflects good credit quality and adequate protection factors. Risk factors may vary with possible changes in the economy. The short-term rating of ‘A-2’ indicates good certainty of timely payment. Liquidity factors and company fundamental factors are sound. Outlook on the assigned ratings has been revised from ‘Negative’ to ‘Stable’. Previous rating action was announced on January 26, 2023.
PEPL is engaged in the manufacture of automotive seats for passenger and commercial vehicles, auto parts including cargo deck, chassis frame, and sheet metal/body parts and has also diversified into foam and synthetic (F&S) products. The ratings derive comfort from the strong sponsorship profile of the Master Group, one of the country’s leading business conglomerates with diversified presence across various business sectors including mattresses, textile, automobiles and energy. The ratings also factor in the capacity enhancement efforts of the Company’s synthetic division which include the addition of two new press lines over the rating review period. However, the overall business risk profile of the Company was elevated during the rating review period on account of steep inflation, currency depreciation, policy rate hikes and import restrictions which have significantly impacted demand for automobiles as well as supply-side operations.
Resultantly, the Company’s topline decreased on a timeline basis; however, the F&S division has helped mitigate drop in revenue. Nonetheless, despite lower gross margins, profitability depicted improvement during the ongoing year vis-à-vis SPLY mainly owing to reduction in financing charges due to lower average debt utilization. Consequently, cash flow coverages and debt repayment capacity have enhanced. Moreover, capitalization indicators depicted an improving trend with decline in debt levels coupled with expansion of the equity base due to internal capital generation. Going forward, the ratings will remain sensitive to improvement in profitability indicators, particularly given the ongoing challenges of the automobile sector, whilst maintaining coverages, liquidity and capitalization levels.
For further information on this ratings announcement, please contact at 042-35723411-13 or email at 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