November 30, 2023 (MLN): Pakistan Credit Rating Agency Limited (PACRA) has maintained entity ratings of KSB Pumps Company Limited (PSX: KSBP) at "A+" for long term and "A1" for short term with a stable outlook forecast, the latest press release issued by PACRA showed.
The ratings reflect the leading position of KSBP as a premier manufacturer of pumps, valves and related services in Pakistan.
Ratings incorporate KSB Pumps’ association with KSB SE & Co. KGaA, Germany (KSB Germany), which is one of the top 5 pump manufacturers of the world.
The company has a state-of-the-art manufacturing facility certified by KSB Germany as MBK – made by KSB.
This is supplemented by robust systems and controls with access to KSB Germany for licensing and technical knowledge.
As a result, the company enjoys a competitive advantage in the domestic market as well as in exporting to other companies across the world including group companies.
The company has a substantial market share in the pump industry. The sale of pumps to industrial customers and raw components exports to KSB group companies make up a significant part of revenues.
KSBP has increased its exports by leveraging its MBK certification and strong expertise and has also increased its footprints in Karachi and Lahore by opening 2 new workshops to support its aftermarket business branded SupremeServ.
Additionally, the company’s revenues are supported through project sales to the public and private sectors; however, the public sector proportion has decreased as the company has now gone into an indirect model for these projects with private companies for improved liquidity.
KSB Pumps margins have improved at the gross level due to an increase in exports in its sales mix, however, their impact is invalidated at the net level due to an increase in finance cost.
KSB Pumps has booked a topline of Rs4.242 billion in 9MCY23 (CY22: Rs4.965bn; CY21: Rs4.334bn) and has an adequate financial profile characterized by a moderately leveraged capital structure.
The working capital of the company is stretched and coverages are deteriorating despite the strategic shift of transitioning to private customers and exports.
The company's association with KSB Group is considered positive. Ratings also take comfort from strong group support, technically and financially, and from its eligibility, under KSB group guidelines, to obtain intercompany loans and utilize umbrella credit facilities created by the parent company.
However, during its entire history, the company never resorted to borrowing from Germany.
The ratings are dependent on the company's ability to improve its core margins and profitability through diversification, execution of better margin projects and exports to group companies.
Prudent working capital management and maintaining strong coverages with improved capacity utilization are imperative for the ratings going forward.
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Posted on: 2023-11-30T11:16:34+05:00
