Karachi, March 26, 2019 (PPI-OT):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). The medium to long-term rating of ‘A’ denotes good credit quality coupled with adequate protection factors. Moreover, risk factors may vary with possible changes in the economy. The short-term rating of ‘A-2’ denotes good certainty of timely payments. Liquidity factors and company fundamentals are considered sound. Outlook on the assigned ratings is ‘Stable’.
OEL is a well-known manufacturer of home appliances in Pakistan. Shareholding of the company is vested with the sponsoring family who have over six decades of experience in the consumer electronics industry. OEL is virtually a wholly owned subsidiary of Orient Color Labs (Pvt.) Limited and a part of Orient Group of Companies. 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 production facility is located in Lahore.
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 ratings draw 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. Albeit current ratio has room for improvement, financial risk of the company is considered moderate as depicted by manageable gearing and leverage indicators and adequate debt service coverage.
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. 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.
For more information, contact:
Director Compliance and Rating Analytics,
VIS Credit Rating Company Limited
VIS House, 128/C, 25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi, Pakistan