PACRA maintains entity ratings of GTYR

August 02, 2023 (MLN): Pakistan Credit Rating Agency Limited (PACRA) has maintained entity ratings of Ghandhara Tyre & Rubber Company Limited (PSX: GTYR) at "A+" for the long term and "A1" for the short term with a stable outlook forecast, the latest press release issued by PACRA showed.

GTYR is a prominent automotive tyre manufacturer in the country catering to different market segments, including Original Equipment Manufacturers (OEMs), Replacement/After Market (RM), Institutions (Govt, Defense, etc.) and Export.

The ratings reflect the company’s strong business profile and long-lasting presence in Pakistan’s tyre industry.

Tyre demand is primarily governed by the 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 a slowdown in economic activity pose risks to profitability.

Consequently, GTYR registered negative topline growth of 23.7% YoY basis owing to lower offtake by OEMs, particularly in the passenger cars segment.

However, the company has increased its focus on export and registered positive growth of 33% for FY23.

The 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 the opening of LC and high material costs, partially offset by better product mix and superior prices.

GTYR’s envisaged strategies are to hold a 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, the management of the company has always invested in modernization and capacity enhancement of plants.

The company is currently working on new sizes & designs for both OEM and RM segments.

Going forward, GTYR 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 the supply of new tyres for SUVs.

A well-devised governance framework and close association with major sponsors alongside an 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 the 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 a challenging industry environment are pertinent. Moreover, prudent management of financial affairs remains important.

Copyright Mettis Link News