Research Update: Car Maker UzAuto Motors Affirmed At 'B+/B' On
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RatingsDirect ResearchUpdateCarMakerUzAutoMotorsAffirmedAtBBOnRecoveryProspectsOutlookRemainsStable 50527172 Jan-27-2022
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- Upside scenario
- Company Description
Downside scenario
We could lower the rating on UAM if: - It fails to attract ECA funding in the first half of 2022 to meet outstanding capital investment needs. - The company is unable to increase production or offset foreign exchange changes or cost inflation through local price increases, leading to EBITDA lower than $200 million in 2022. - We observe continued negative FOCF as a result of higher capital investments or working capital requirements than currently envisaged in our base case, with no adequate funding. www.spglobal.com/ratingsdirect January 27, 2022 3 Research Update: Car Maker UzAuto Motors Affirmed At 'B+/B' On Recovery Prospects; Outlook Remains Stable A negative rating action could be also triggered by debt accumulation at the holding company level, with consolidated adjusted debt to EBITDA at the holding company above 3.0x. Upside scenario We could consider raising the rating if the company builds up a strong liquidity position, generates EBITDA of higher than $300 million, maintains adjusted FFO to debt consistently above 45%, and generates cumulative FOCF of about $100 million in 2022-2023. The credit quality of parent UzAuto Sanoat would also need to develop in line with that of UAM to support a potential upgrade. Notably, we expect the parent's credit metrics to be similar to those of UAM, implying limited additional debt (other than assumed in our base case) and no material negative cash burn at other subsidiaries. We could also raise the rating on UAM if we raise the sovereign rating on Uzbekistan. Company Description Based in Uzbekistan, UAM is the largest passenger vehicle manufacturer in Central Asia. In 2020, it had adjusted EBITDA of $235 million and sales of 295,000 units, mostly in the lower-priced segment. The company currently produces 12 passenger car models under the Chevrolet brand in technical partnership with GM. UAM benefits from high import tariffs imposed on imported cars without the level of localization required by the Uzbek government, with its domestic market share in passenger vehicles at 96% as of year-end 2021. Its products are also exported to other countries in the Commonwealth of Independent States, with export sales contributing about 15% to total revenue as of year-end 2021. The GEM project, which will require about $350 million in investments in 2020-2022, is an initiative under which UAM plans to introduce new sports utility vehicle (SUV)-B and B-class models, designed by GM specifically for emerging markets. Once fully operational, the company is targeting annual new model production of 190,000 units to replace older models. The project should increase the local cost component, reducing exposure to foreign currency risk, and support exports, contributing 14%-15% of revenue by 2023, up from about 7% in 2020. The company was founded in 1993 as a joint venture between Uzbekistan's government and Daewoo Motors, with GM replacing Daewoo in 2008. In 2018, UzAuto Sanoat acquired GM's 25% stake and UAM is now 100% owned by the government of Uzbekistan. Download 141.21 Kb. Do'stlaringiz bilan baham: |
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