Lahore, May 30, 2023 (PPI-OT): Panther Tyres Limited (‘PTL’ or ‘the Company’) is primarily engaged in the manufacturing and sale of tyres and tubes for vehicles followed by the sale of auto parts and lubricants. The ratings reflect Company’s prominent position and brand equity to serve OEMs and replacement market. In an industry, which is volume driven and price sensitive, PTL sustains its market share underpinned by product diversification in respective niches. Tyre demand is primarily governed by replacement market followed by automobile production. Intense competition between tyre manufacturers necessitates high quality products at affordable prices.
Adoption of advanced technology is indispensable to drive the growth of rubber tyre and tube industry in Pakistan. Fluctuating prices of raw materials can hinder the growth of rubber tyre and tube sector. With ongoing challenges for the economy of Pakistan, numerous factors have put pressure on the players in auto and allied sectors, affecting businesses both directly and indirectly. The economy has been slowing down in recent months, which has led to reduced demand for new vehicles and replacement tyres. Conventionally, the demand for 2- and 3-wheel segments is served by local market players.
Accordingly, PTL captures formidable market share in motorcycle tyres, tractor tyres, rickshaw/loader tyres. Besides, PTL opened new chapter by manufacturing OTR tyres in Pakistan – a step towards import substitution. Nevertheless, policy rate hike, exchange rate volatility, and imports through grey channels can pose serious business risks (specifically in terms of volume and margins). As at end Mar-23, topline of the Company experienced negative growth of ~7.5% on a year-on-year basis and positive growth of ~2.0% on a quarter-over-quarter basis. During review period, gross margin stood at ~12.6% while net margin stood at only ~0.7% owing to increased materials prices, exponential rise in exchange rates, energy cost, and high financial charges.
With its legal status converted into a Public Listed Entity, quality of governance structure improved through independent oversight. Capital structure of the Company is considered leveraged as PTL funds its expansion by means of debt availed at concessionary rates, making the debt book adequate. Financial risk profile of the Company is characterized by slightly stretched working capital cycle and reduced coverages. Going forward, growth in sales volume is substantial to attain high market share and maximize profitability matrix. The management needs to devise an effective pricing strategy to cope with rising competition and current economic challenges. The Company must intend to materialize the envisaged strategies by strong oversight of risk, compliance and code of corporate governance.
The ratings are dependent on the Company's ability to retain its position amidst competitive business environment, management of market risks, and increase in international outreach. Prudent financial performance like healthy coverages and effective liquidity profile shall remain vital for the business.
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: [email protected]
Website: www.pacra.com
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