VIS Reaffirms Entity Ratings of Procon Engineering (Private) Limited - Press Release issued by VIS Credit Rating Company Limited.

Karachi -- August 27, 2019 (PPI-OT)

Following is the text of press release issued by VIS Credit Rating Company Limited

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VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Procon Engineering Private Limited (PEPL) at 'A/A-2' (Single A/A-Two). Outlook on the assigned ratings is 'Stable'. Outlook on the assigned ratings is 'Stable'. The long term rating of 'A' signifies good credit quality; Protection factors are adequate. Risk factors may vary with possible changes in the economy. The short-term rating of 'A-2' signifies good certainty of timely payment; Liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small. The previous rating was announced on April 6, 2018.

The assigned ratings incorporate the business diversification of PEPL in vehicle seats, where it has a prominent market position, and significant revenue generation from sheet metal products. Current ratings also reflect the support received for operations and quality assurance through PEPL's technical assistance program. Business risk profile is considered challenging in view of the weak macroeconomic indicators that may affect the demand for automobiles going forward; however, the management's focus on product diversification is expected to support financial profile of the company. Moreover, secured margins through indexation of selling prices to input costs also provide cushion to the ratings.

Revenue base of the company registered healthy growth in FY18 and HY19 vis-AA -vis the corresponding periods in the previous year. Nonetheless, client concentration remains on the higher side given the oligopolistic nature of industry. However...