VIS upgrades short-term entity rating of SAZEW

February 12, 2025 (MLN):VIS Credit Rating Company Limited (VIS) has upgraded the short-term entity rating of Sazgar Engineering Works Limited (PSX: SAZEW) from ‘A/A2’ (Single A/A Two) to ‘A/A1’ (Single A/ A One).

The medium to long term rating of ‘A’ signifies good credit quality with adequate protection factors.

Risk factors may vary with possible changes in the economy.

The short-term rating of ‘A1’ denotes a strong likelihood of timely repayment of short-term obligations with excellent liquidity factors.

Outlook on the assigned rating has been changed to ‘Positive’ from ‘Stable’.

Previous ratings action was announced on January 25th, 2024.

SAZEW, established as a private limited company in 1991 and converted to public limited in 1994, is engaged in the manufacturing and selling of automobiles, auto parts and household appliances.

The company’s major ownership has remained with the Hameed family since its inception.

SAZEW was a prominent name in three-wheelers before entering the SUV and HEV segment, where it was among 20 companies awarded Greenfield Status in the Automotive Development Policy (2016-21).

SAZEW has a yearly installed capacity of 24,000 units for four-wheelers and 20,000 units for three-wheelers.

The ratings consider SAZEW’s leadership position in three-wheelers while also recognizing its emergence as a dominant player in the four-wheeler segment during FY24 and 5MFY25.

This growth is driven by competitive pricing, feature-rich models, increasing consumer preference for SUVs, advanced hybrid technology, effective marketing and distribution strategies, and favorable government policies.

During FY24, the Company noted substantial growth in net sales and improvement in overall profitability indicators.

Moreover, the liquidity profile remained satisfactory while robust coverage and capitalization on the back of negligible bank borrowings, have further supported the ratings.

The assigned short-term rating upgrade and ‘Positive’ outlook reflect the Company’s strong trajectory in sales and profitability, driven by higher offtake amid recovered automobile demand.

However, the long-term sustainability of sales volumes remains uncertain due to economic cyclicality and a competitive landscape.

Going forward, continuation of sales growth along with maintenance of coverages and capitalization indicators will remain important rating triggers.

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