Press Release

VIS Maintains Entity Ratings of Master Changan Motors Limited

Karachi, January 31, 2025: VIS Credit Rating Company Limited (VIS) has maintained the entity ratings of Master Changan Motors Limited (‘MCML’ or ‘the Company’) at ‘A-/A2’ (Single A Minus/A Two), respectively. Medium to long-term rating of ‘A-’ reflects good credit quality; Protection factors are adequate. Risk factors may vary with possible changes in the economy. Short-term rating of ‘A2’ signifies good likelihood of timely repayment of short-term obligations with sound short-term liquidity factors. Outlook on the assigned rating has been revised from ‘Stable’ to ‘Positive’. Previous rating action was announced on January 23, 2024.

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 - Changan Automobile Investment (Shenzhen) Corporation Limited (Changan) and Master Motor Corporation (Private) Limited (MMCL). 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.

Amid economic slowdown during FY23 and FY24, automobiles sales witnessed a sharp decline, wherein volumetric sales of passenger cars (PC) slumped by 16% during the period under review. However, during 5MFY25, with some stabilization in the economic indicators amid declining interest rates and improving foreign exchange reserves, PC sales increased by 47% Y/Y compared to SPLY.

MCML faced declining volumes due to weak demand and competition, resulting in lower net sales. However, an improved gross margin and significant increase in income from investments in mutual funds boosted net profit in FY24. Surge in cash flows led to improved debt coverage. MCML maintained a sound liquidity profile compared to industry peers. The revision in rating outlook reflects the Company's low financial risk supported by some recent improvement in industry indicators and a virtually debt-free status at end-FY24.

Looking ahead, MCML’s management views profitability to improve with ambitious projected unit sales, a favorable sales mix, and lower financial charges. Meanwhile, the competition in the automobile industry is intensifying both among existing players and new entrants with inroads expected from EVs hence the business risk of the industry remains elevated. The ratings remain underpinned to the overall industry risk, in the wake of weak macroeconomic indicators and developing foreign exchange risk, as also continued improvement in the financial risk profile of the Company going ahead with sound coverages and capital structure.

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

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 2025 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .