Press Release

VIS Reaffirmed Entity Ratings of Master Changan Motors Limited

Karachi, December 30, 2022: VIS Credit Rating Company Limited (VIS) has reaffirmed entity ratings of ‘A-/A-2’ (Single A Minus/A-Two) to Master Changan Motors Limited (MCML). The medium to long-term rating of ‘A-’ denotes good credit quality with adequate protection factors. Risk factors may vary with possible changes in the economy. The short-term rating of ‘A-2’ denotes good certainty of timely payment. Liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small. Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on October 29, 2021.

MCML is principally engaged in the assembly and progressive manufacturing and sale of pickups and vans and passenger cars. The assigned ratings incorporate MCML’s affiliation with experienced and sound sponsors - Master Motor Corporation (Private) Limited (MMCL) and Changan Automobile Investment (Shenzhen) Corporation Limited (Changan). Changan is one of China’s leading state-owned enterprises with international presence, while MMCL is part of well-diversified Master Group of Companies which has presence in mattresses & upholstery, home fashion, textile, chemical, power, automobile and auto part sectors.

The automobile industry grew by 46% Y/Y in terms of volumes during FY22. However, surging product prices on the back of significant rupee devaluation, increasing fuel prices and hike in interest rates has impacted automobile sales in Q1’23. Moreover, the industry remains exposed to changes in the economic environment, arising out of the outcome of the IMF program, foreign exchange position and geo-political situation. Business risk profile of the Company is supported through diversification in product portfolio from van, pickup, sedan and SUV, however, ratings will remain sensitive to overall demand risk of automobile sector.

Ratings incorporate significant revenue growth during FY22 driven by higher unit sales of Sedan and addition of SUV during the year. Gross margins inched down during the year as the cost pressures were increased due to rupee depreciation. However, with the significant increase in topline, resulting in higher efficiencies and operating margins for the Company. In line with this, net margins also depicted improvement. Consequently, cashflow coverage and debt servicing has improved as at Jun’22. However, with the increase in finance cost during Q1’23, debt coverage has declined. We expect that with the slowdown in demand and rising financial cost, debt servicing pressure will remain. Capitalization indicators of MCML are also expected to stay in the same range. Going forward, improvement in future profitability with adequate cashflow and debt coverages and maintenance of capitalization indicators will remain key rating drivers.

For further information on this rating announcement, please contact M. Amin Hamdani (Ext: 217) or the undersigned (Ext. 207) at 021-35311861-70 or email at

Sara Ahmed

Applicable Rating Criteria: Industrial Corporates (August 2021)

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