Ghandhara Tyre retains 'A+/A1' ratings amid business challenges

August 03, 2026 (MLN): PACRA has maintained the entity ratings of Ghandhara Tyre & Rubber Company Limited (PSX: GTYR) at 'A+/A1', with a 'Stable' outlook and the ratings kept on Rating Watch, unchanged from the previous review.

The Company holds a leading position in Pakistan's tyre manufacturing industry, with a diversified product portfolio spanning Passenger Car Radial, Light Truck/Bus, Agricultural, Off-the-Road, SUV, and two-wheeler segments, serving both OEM and replacement markets through a nationwide dealer network.

Product quality is supported by a technical collaboration with China's Shandong Huasheng Rubber Co., Ltd.

The industry remains exposed to imported raw materials such as natural and synthetic rubber, carbon black, and steel cord, keeping margins sensitive to global commodity prices and PKR/USD movement.

Easing inflation, a lower policy rate, and a comparatively stable exchange rate supported a broad-based automotive sector recovery in FY26. As per PAMA data, passenger car sales rose ~38.7% over FY25, LCV and jeep sales ~40.9%, truck and bus sales ~61%, and two- and three-wheeler sales ~29.8%, while farm tractor sales slipped ~1.4%.

Despite this momentum, and geopolitical tensions that pushed up raw material costs and disrupted supply chains in 2HFY26, GTYR's topline moved counter to the industry trend, falling ~9.1% in 9MFY26 after a ~13.3% decline in FY25 largely volumetric, on softer farm tyre and replacement market offtake, a shift in sales mix, and margins compressed by cost inputs that could not be fully passed on.

The Company's ownership and governance structure remains a key support to the ratings, underpinned by a financially sound and diversified sponsor base, an actively engaged board with meaningful independent representation, and an experienced management team.

The financial risk profile continues to show pressure on coverage, internal cash generation, working capital, and leverage, though measures are underway to reduce inventory and receivables and ease reliance on short-term borrowing.

The Rating Watch shows elevated business and financial risk from these trends and continued monitoring pending progress on management's plan centered on cost efficiency, planned SUV tyre capacity enhancement, a renewed replacement-market focus, and export diversification beyond Afghanistan, aided by recent DOT certification.

The ratings remain contingent on sustained revenue growth, meaningful margin improvement, and a better-balanced risk profile achieved through prudent financial management and continued compliance with the business plan.

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