RAEX Agency (RA Expert) increased the credit rating of PJSC GAZ from ruBBB- up to ruBBB. Such increase in the credit rating was mostly caused by reduction of the debt load, restructuring of the credit portfolio by significant prolongation of its repayment deadlines, and general reduction in the interest rate load by decrease in the interest rates. Amid recovery of the market demand and increase in the revenues in 2017, the company repaid a portion of its debt and significantly reduced the the net debt to EBITDA ratio as of the end of 2017.
The second driver is improvement of the corporate profitability. According to the estimates performed by the agency, the amended net profit without foreign exchange differences and interest subsidies became positive in 2017. Moreover, the EBITDA grew by 38/% and the EBITDA margin – from 6.6% up to 8.3% in 2017 as per the estimates of the agency.
According to the estimates of consolidated non-audited GAZ Group reporting, the corporate revenues for 2017 amounted to 165 BRUB, the cash flow from operating activities was estimated to be 11.8 BRUB.
The agency acknowledges the external economic environment and business risks of the company to be favourable. GAZ Group remains the leader on the Russian LCV market, is a leading actor on the modern city bus market, and has a significant share in the heavy-duty trucks section. The Russian automotive market still shows a recovery after the decline in 2014-2015. Amid the expectations on the further demand, the corporate market and competitive positions are estimated to be high due to a large market share of the company on its key distribution markets. With regard to the forecast market demand growth and active market launch of new GAZ Group models, it is expected that even in the most conservative scenario the company will maintain its market shares on the key domestic markets. The agency believes that GAZ Group has additional growth potential due to the entrance of the export markets and increase in revenues due to low level of presence on the foreign markets.
The agency also pointed out relatively high corporate management quality, high level of strategic procurement and data transparency of the company. The agency also underlined the high quality of risk management, mostly due to the availability of insurance against all risks, operational risk chart, good IT support, and high level of governing of the risk management and control processes. The quality of production process arrangement and the product quality monitoring system have an indirect positive impact over the assessment of the risk management quality.
