The Pakistan Credit Rating Agency Limited
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PACRA Assigns Initial Entity Ratings To Service Long March Tyres (Pvt.) Ltd.

Rating Type Entity
(27-Jun-23 )
Action Initial
Long Term A-
Short Term A2
Outlook Stable
Rating Watch -

Service Long March Tyres (Private) Limited (‘SLM Tyres’ or ‘the Company’) is a private limited concern specialized in the manufacturing and marketing of radial tyres for trucks & buses. SLM Tyres is the first All-Steel Radial Tyres manufacturing facility in Pakistan with complete transfer of technology from the commencement of the project. The Company is a joint venture arrangement between Service Industries Limited (SIL), Chaoyang Long March Tyre Company Limited (LM), and Myco Corporation Pakistan. The ratings draw direct comfort from longstanding position of SIL in Pakistan and LM in China – a leading Chinese manufacturer of all-steel radial tyres. Total estimated cost of project stands at USD 300mln with targeted production capacity of 2.4mln tyres per annum. The manufacturing facility is being set up in three phases: phase 1 with annual tyre production of 0.74mln, phase 2 of 1.2mln, and phase 3 of 2.4mln. At present, its production capacity utilization stands at ~30pc. The capacity is likely to ramp up in upcoming years considering the solid expansion plans and rising demand of radial tyres for trucks & buses segment in Pakistan. Tyre demand is primarily governed by replacement market followed by automobile OEMs. Intense competition from imported tyres necessitates high quality products at affordable prices. SLM Tyres intends to build its clientele base across the globe through channeling high-quality radial tyres and affirmation of multi-brand names under its sponsorship. The project has been set up in S.I.T.E Area, Nooriabad, Sindh. During Mar’22, the Company officially commenced its commercial production to serve local demand of radial tyres along with seeking benefits from export avenues to multiple countries. SLM Tyres has built a nationwide marketing and distribution channel. In radial tyres segment, the Company faces direct competition from imported and grey market tyres. With successful completion of Phase 1, the Company has registered significant growth of ~570.2% with topline clocked at ~PKR 10.7bln during end of 9MFY23. Its profitability matrix shall start to materialize in near future with each step towards running operations and completion of project. Financial risk profile is demonstrated by adequate capital cycle, low coverages, & leveraged capital structure. Going forward, the cash flows requirement for the development of project is planned to be met through direct support from Sponsors and working capital lines from banks. As of now, SLM Tyres has availed loans at concessionary rates to support project growth.
The ratings are dependent on the Company’s ability to maintain a robust financial discipline. Moreover, the achievement of breakeven point and commensurate profit growth shall remain imperative.

About the Entity
Service Long March Tyres (Private) Limited was incorporated in Pakistan on January 7th, 2020 as a private limited entity. It is primarily engaged in the manufacturing & sale of all-steel radial tyres in Pakistan. The Company’s ownership is a split between Chaoyang Long March Tyre Co. Ltd. (~44%), Service Industries Limited (~32.09%), Service Global Footwear Limited (~18.91%), and Mr. Shabir Ahmad (~5.0%). The board of SLM Tyres comprises 9 members, including Mr. Li Qingwen (Chairman) and Mr. Omar Saeed (CEO). Mr. Omar has been associated with Service Group for many years and hold related industry experience.

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.