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VIS Reaffirms Ratings of Omar Jibran Engineering Industries Limited

April 23, 2019

Karachi, April 23, 2019 (PPI-OT): VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Omar Jibran Engineering Industries Limited (OJEIL) at ‘A-/A-2’ (Single A Minus/A-Two). Outlook on the assigned ratings is ‘Stable’. The long term rating of ‘A’ signifies good credit quality; Protection factors are adequate. Risk factors may vary with possible changes in the economy. The short-term rating of ‘A-2’ signifies good certainty of timely payment; Liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small. The previous rating was announced on 6th July 2017.

The assigned ratings to OJEIL incorporates company’s position as the single source supplier of several critical auto parts to leading automobile and motorcycle manufacturers, adequate business risk profile on account of growing sales of company despite slowdown in overall industry automobile sales, protective duty structure and existence of pass through mechanism related to raw material costs and significant exchange fluctuations. Liquidity and capitalization indicators have also improved on timeline basis. Ratings could be constrained by adverse changes in operating environment and duty structure in raw and finished products.

Volumetric increase in sales translated to growth in profitability in FY18. Gross and net margins were sustained at similar level vis-à-vis the preceding year. Concentration in sales continues to remain significant; however, the same partly mitigated by the company’s long term association of clients and diversification of product lines, production and marketing of which have been planned to commence within the current financial year. Management is expecting healthy growth in sales over the rating horizon due to steady demand for sales growth from existing players and introduction of new products. The same are expected to translate to higher profitability.

Equity base of the company increased significantly in FY18 primarily on account of issue of right shares. Resultantly, gearing and leverage ratios were reported lower. Liquidity profile has remained a function of profitability of the company. With growth in bottom-line, Funds from Operations (FFO) in relation to total debt improved in FY18. Current ratio has observed improvement on the back of increase in stock in trade, trade debts and short-term investments. Stock in trade and trade debts provide adequate coverage for short-term borrowings. Going forward, the ratings are dependent: on continuation of orders from current customers, improvement in profitability indicators and maintenance of liquidity indicators.

For more information, contact:
Director Compliance and Rating Analytics,
VIS Credit Rating Company Limited
VIS House, 128/C, 25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi, Pakistan
Tel: +92-21-35311861-72
Fax: +92-21-35311873

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