Press Release

VIS Revises Entity Ratings of Omar Jibran Engineering Industries Limited (OJEIL)

Karachi, November 17, 2022: VIS Credit Rating Company Limited (VIS) has maintained entity ratings of Omar Jibran Engineering Industries Limited (OJEIL) at ‘A-/A-2’ (Single A Minus/A-Two). Outlook on the assigned ratings has been revised from ‘Stable’ to ‘Negative’ status. Long-term entity rating of ‘A-’ reflects good credit quality, adequate protection factors. 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 fundamental factors are sound. Previous rating action was announced on September 08, 2021.

Revision in rating outlook captures significant demand slowdown in the automobile industry in view of the weak economic fundamentals of the country, high benchmark rates, political uncertainty, inflationary pressures, floods in the country and the restrictions on quantity of imports of CKD kits imposed by State Bank of Pakistan to conserve the dwindling foreign reserves of the country. Moreover, cyclicality in sales due to slow down in GDP growth remains a key business risk factor.

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 (IMC), Honda Atlas Cars Limited (HAC) and Atlas Honda Limited (AHL - manufacturers of Honda brand motorcycles). OJEIL’s overall financial performance for FY22 reflects higher revenue base, downward trend in margins and sufficient liquidity and leverage indicators of the Company. Revenue base increment in the past two outgoing years was a result of both volumes and average selling prices. With assembly lines disruptions across automobile industry due to subdued demand, VIS expects weakening in topline over the next year. Particularly as IMC provides two-fifth of the Company’s topline. As per management, organic growth from existing clients, addition of customers and diversification in product offerings are key focus areas. Materialization of the same is contingent on improved performance of the macroeconomic indicators.

Margins weakened in FY22 and the ongoing year due to volatility in raw material costs, time delays in transferring the impact of the same to customers and higher financial costs incurred on carrying inventory levels. Sufficient Cash flow coverages and negative working capital cycle in FY22 support liquidity profile. Current ratio improved in lieu of re-profiling of short-term debt into long-term debt. Sustaining liquidity profile amidst weak operating environment will be important from a ratings perspective. On the capitalization front, while gearing and leverage indicators are on the lower side, projected increase in the same to manage liquidity constraints amidst weak demand outlook may increase capitalization indicators in the ongoing year.

For further information on this rating announcement, please contact Ms. Asfia Aziz (Ext: 212) or the undersigned (Ext. 207) at 021-35311861-70 or email at

Sara Ahmed

Applicable Rating Criteria: Industrial Corporates (August 2021)

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 2022 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

VIS Credit Rating Company Limited