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PACRA Maintains Entity Ratings of Ghandhara Tyre and Rubber Company Limited | Assigns Rating Watch

Lahore, August 01, 2023 (PPI-OT): Ghandhara Tyre and Rubber Company Limited (formerly known as The General Tyre and Rubber Company of Pakistan Limited) is a prominent automotive tyre manufacturer in the country catering different market segments, including Original Equipment Manufacturers (OEMs), Replacement/After Market (RM), Institutions (Govt, Defense, etc.) and Export. The ratings reflect Company’s strong business profile and long-lasting presence in Pakistan’s tyre industry. The Company sustains its market share through product diversification in related niches. Tyre demand is primarily governed by replacement market followed by automobile OEMs.

Intense competition from imported tyres and tyres smuggled through grey channels necessitates high quality products at affordable prices. Pertinently, non-production days of passenger car OEMs, fluctuating prices of raw materials, and slowdown in economic activity pose risk to profitability. Consequently, the Company registered negative topline growth of ~23.7% YoY basis owing to lower offtake by OEMs, particularly in passenger cars segment. However, the Company has increased its focus on export and registered positive growth of 33% for FY23. Profitability matrix for the review period was mainly influenced by exchange loss suffered due to rupee devaluation, supply issue of raw materials because of restrictions on opening of LC and high material costs, partially offset by better product mix and superior prices.

The Company’s envisaged strategies are to hold strong foothold in its respective niche comprising 4-wheeler tyres for cars, LCVs, tractors, buses, trucks and OTR (off the road). To ensure business growth, management of the Company has always invested in modernization and capacity enhancement of plant. The Company is currently working on new sizes and designs for both OEM and RM segments. Going forward, the Company is expected to receive benefits from the entry of new OEMs in the market as it is already in close coordination with auto players to materialize supply of new tyres for SUVs. A well-devised governance framework, close association with major sponsors alongside experienced management team are considered positive for the ratings. Technical collaboration with Continental AG; Germany (one of the world’s leading tyre manufacturers) has supported the Company in developing expertise on technical front, which assures adherence to international quality standards.

The ratings are dependent on the Company’s ability to improve its business risk vis-à-vis financial risk profile along with sustainable margins. Cautious management strategies amidst challenging industry environment are pertinent. Moreover, prudent management of financial affairs remains important.

For more information, contact:

Analyst,

The Pakistan Credit Rating Agency Limited (PACRA)

Awami Complex, FB1, Usman Block New Garden Town,

Lahore, Pakistan

Tel: +92-42-5869504-6

Fax: +92-42-5830425

Email: hammad.rashid@pacra.com

Website: www.pacra.com

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