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PACRA Maintains Entity Ratings of Toyota Jinnah Motors (Private) Limited

Lahore, January 18, 2023 (PPI-OT):Car dealership (authorized) hinges on the robustness of principal (auto/ manufacturer, assembler). The strength of a car dealer is contingent on the relative positioning of principal in the respective market. There is a pre-set qualitative and quantitative criterion – imposed by the principal on the dealer’s network. The rating takes comfort from Toyota Jinnah’s alliance with Indus Motor Company – owned by Habib Group, Toyota Motor Corporation and Toyota Tsusho Corporation.

Toyota Jinnah Motors (TJM) holds 4S car dealership. Over the period of time TJM has built a sustainable position in the competitive industry of Pakistan. TJM’s income streams derived from sales of new vehicles (85%) and after-sales services (15%). The profitability is being supplemented by the ‘After Sale’ segment reporting net profitability for the dealership and covering its operational cost. Hence limiting and/or cushioning the unforeseen drag on the risk absorption capacity.

Currently, the auto industry is facing a downturn due to escalating production costs on account of rupee depreciation, while demand has also declined due to the prevailing economic challenges, tightening the fiscal policy and imposition of higher duties and taxes on vehicles, furthermore due to restrictions on import of CKD kits auto sector is operating at ~50% of its capacity and facing frequent plant shutdowns. Pakistan Automotive Manufacturers Association (PAMA) recent statistical data revealed ~39% decline in the sales of passenger cars as well.

During the period under review (FY22) revenues recorded ~73% growth due to the inflationary effect and a slight increase in sales volume, however, margins are largely sustained. The Company has also received benefits under the new leadership and of sponsors’ experience and abilities. The financial risk profile of Toyota Jinnah Motors is demonstrated by comfortable cashflows, coverages, and working capital cycle. Capital structure is moderately leveraged and mainly comprised of short-term borrowings for working capital management. The Company has substantially reduced its long-term borrowings from financial institutions through sponsors’ support and through internally generated cashflows.

The ratings are dependent on the management’s ability to sustain its business profile while benefiting from positive demand fundamentals, financial discipline/transparency is crucial. Moreover, strengthening of governance framework is pivotal for any growing business concern.

For more information, contact:
Analyst,
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore, Pakistan
Tel: +92-42-5869504-6
Fax: +92-42-5830425
Email: hammad.rashid@pacra.com
Website: www.pacra.com

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