Press Release
VIS Assigns Initial Entity Ratings to Microtech Industries (Private) Limited
Karachi, July 12, 2024: VIS Credit Rating Company Limited (VIS) assigns initial entity ratings to Microtech Industries (Private) Limited (‘’MIL’’ or ‘’the Company’’) of ‘A-/A-2' (Single A Minus/A Two). Medium to long term rating of 'A-' indicates good credit quality; protection factors are adequate. 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 fundamentals are sound. Access to capital markets is good. Risk factors are small. Outlook on the ratings has been assigned as ‘’Stable’’.
MIL was incorporated in Pakistan under the Companies Ordinance, 1984 (now the Companies Act, 2017) as a single member company on January 15, 2003 and transitioned to a private limited company by June 30, 2005. MIL operates in the design, development, and manufacturing of hi-tech energy meters and related solutions, utilizing a 140,000 square feet factory located at Attari Industrial Estate, Lahore. The Company shares common directorship with Simla Tracon (Pvt.) Ltd. (STL) and Microtech Transformers (Pvt.) Ltd. (MTL), where Mr. Shayan Siddiqi, CEO of MIL, holds ownership stakes of 33% in STL and 50% in MTL.
The assigned ratings reflect MIL's high business risk profile, primarily due to its regulated market environment, confined clientele, and reliance on imported raw materials. The industry exhibits low cyclicality, supported by consistent demand from electricity distribution companies (DISCOs) in Pakistan. MIL holds a notable 25% market share in Automatic Reading Meters (AMR) and an 18% share in static energy meters, establishing its significant market presence. However, its exclusive sales to DISCOs expose it to revenue risks associated with tender awards, as well as liquidity risk stemming from payment challenges within the sector.
The ratings also incorporate MIL's financial risk profile, bolstered by substantial growth in its revenue and profitability during FY23. The Company achieved significant revenue growth due to securing more contracrs throughout the year, contributing to enhanced gross margins and bottom-line performance. The ratings further acknowledge improvements in capitalization metrics, marked by a notable reduction in total debt and an increase in equity base, despite an elevated leverage attributed to higher trade payables. Coverage ratios and liquidity position are deemed adequate and align with the assigned ratings. Additionally, the stable outlook reflects expectations of sustained revenue growth, supported by the Company's substantial market presence and orders in hand. Moreover, improvement in the Company’s financial metrics in 9MFY24 also support the assigned ratings.
Going forward, the ratings will remain sensitive to the maintenance of the capitalization profile.
For further information on this ratings announcement, please contact at 021-35311861-64 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
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