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The Pakistan Credit Rating Agency Limited

Date
30-Dec-2016
Analysts
Saira Rizwan
saira.rizwan@pacra.com

Rida Zahoor
rida.zahoor@pacra.com

+92-42-35869504
www.pacra.com
Applicable Criteria

  • Rating Modifiers | Outlook and Rating Watch (Jun 16) [View]
  • Correlation between Long-term and Short-term rating (Jun 16) [View]

Related Research

  • Sector Study | Electrical Engineering (Dec 16) [View]
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PACRA Maintains Entity Ratings of MicroTech Industries (Pvt.) Limited
 Rating Type Entity
Current
(30-Dec-2016)
Previous
(30-Dec-2016)
 Action Maintain Maintain
 Long Term BBB+ BBB+
 Short Term A2 A2
 Outlook Stable Stable
 Rating Watch - -

The ratings reflect MicroTech's adequate business profile characterised by healthy market share in energy meter manufacturing segment. The company's key strength lies in its indigenous Research and Development infrastructure and an able management team spearheading the company's operations. Tender-based model exposes the company to i) concentration risk - single product and single buyer, and ii) volatility in revenue and margins. At the same time, inherent risks of procedural delays in awarding contract and price sensitivity remain. However, comfort is drawn from the company’s currently favourable competitive position in high margin smart metering business, and sizeable business potential [particularly for smart meters] in local market, also unveiled by lately initiated foreign funded government projects focused towards infrastructure reforms. However, its translation in revenues may take time. MicroTech is eyeing revenues augmentation through, i) expansion in existing capacity, though small, and ii) diversification in related business; installation of Injecting Molding plant is underway. The company's financial risk profile is adequate. The company's financial requirement emanate from its needs to fund its working capital (mainly receivables) and arranging requisite quantum of guarantees for soliciting business volumes. Current structure of bank limits provide reasonable support to the company's growth targets. However, participation in any new large project; expected to roll-out by the government over the medium-term, may require further capacities.

The ratings are dependent on the company's ability to remain abreast to technological progression in its line of business. This would enable its market position particularly in local industry. Proactive management of business affairs, thus sustaining margins, is imperative. Meanwhile, strengthening in governance structure is needed to improve independent oversight.
About the Entity
MicroTech Industries (Private) Limited (MicroTech), incorporated in 2003, manufactures digital and smart meters. MicroTech works with key stakeholders of the energy sector in Pakistan in order to develop and implement indigenous smart metering energy solutions. The Company is majority (55%) owned by Saeed family - key sponsors - followed by Siddiqi family (45%).

The company has a two members board, both are shareholders and holds executive positions. The CEO, Mr. Nauman Saeed - an electric engineer with over two decades of experience - also holds the office of the Chairman. He is supported by an experienced management team.
The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.
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