Press Release

VIS Reaffirms Entity Ratings of Agriauto Industries Limited

Karachi, November 26, 2024: VIS Credit Rating Company Ltd. (VIS) has reaffirmed entity ratings of Agriauto Industries Limited (‘AGIL’ or ‘the Company’) at ‘A-/A1’ (Single A Minus/A One). The medium to long term rating of ‘A-’ signifies good credit quality; Protection factors are adequate. Risk factors may vary with possible changes in the economy. Short term rating of ‘A1’ denotes strong likelihood of timely repayment of short-term obligations with excellent liquidity factors. Outlook on the assigned rating is ‘Stable’. Previous rating action was announced on November 16, 2023.

AGIL is engaged in manufacturing and distribution of automotive parts, catering to both original equipment manufacturers (OEMs) and the aftermarket segment. The company operates under the House of Habib (HoH), a prominent and well-established conglomerate in Pakistan. The robust sponsorship profile of HoH has been a key consideration in AGIL's assigned credit ratings. Additionally, as a publicly listed entity, AGIL is required to adhere to Corporate Governance regulations for listed companies, which have also been taken into account in the assigned ratings.

AGIL is the sole producer of locally manufactured car shock absorbers and struts in Pakistan, with over four decades of experience. The Company has established long-term technological partnerships with leading international parts manufacturers and maintains a leading position in Pakistan's domestic auto parts market. Ratings take into account high to medium business risk profile of the Company, given historical volatility in gross margins which is contingent on the demand of automobiles.

Net sales during FY24 were supported by favorable price revisions, although volumes continued to be impacted. Gross margins weakened due to decline in sales of four wheelers, further exasperate by high finance costs consequently contributing to net losses. Moreover, debt coverages weakened albeit remained at healthy levels; liquidity profile remained strong. The Company's conservative capitalization profile provides comfort to the ratings, despite an uptick in leverage and gearing ratio. Looking ahead, the ongoing macroeconomic recovery and declining interest rates are expected to drive a rebound in automobile sales this year, which in turn is anticipated to increase the demand for auto parts. Assigned ratings remain sensitive to recovery in profitability and improvement in debt coverage profile.

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



Applicable Rating Criteria: 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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