VIS Assigns Initial Entity Ratings to Orient Electronics

March 27, 2019: VIS Credit Rating Company Limited (VIS) has assigned initial entity ratings of ‘A/A-2’ (Single A /A-Two) to Orient Electronics (Pvt.) Limited (OEL), a well-known manufacturer of home appliances in Pakistan. Outlook on the assigned ratings is ‘Stable’.

According to VIS, the medium to long-term rating of ‘A’ denotes good credit quality coupled with adequate protection factors. Moreover, they believe that risk factors may vary with possible changes in the economy.

The short-term rating of ‘A-2’ denotes good certainty of timely payments while liquidity factors and company fundamentals are considered sound.

The business model of OEL revolves around the manufacturing, assembling, and sale of a wide range of home appliances, including air conditioners, refrigerators, deep freezers, LED TVs, water dispensers and microwave ovens under the brand name 'Orient'.

The assigned ratings take into account extensive experience of sponsors in the consumer electronics industry that has helped OEL maintain healthy relations with the vendors and dealers

The rating action draws comfort from sizeable scale of operations with steadily growing sales and improving gross margins, considerable geographic diversification, strong brand equity and positive demand for air conditioners and refrigerators.

“The ratings however, factor in dynamic consumer preferences for electronics goods, high price sensitivity, and vulnerability to foreign exchange risk amidst low pricing power, and weak corporate governance,” says the press release published by VIS.

The company’s ability to enhance scale of operations, improve profit margins, and maintain leverage indicators around current levels would remain important for the ratings.