Gaz : Expert RA Rating Agency increased PJSC GAZ credit rating

Expert RA Rating Agency has increased the credit rating of PJSC GAZ, which is a legal entity consolidating financial results of GAZ Group, to А (II). The rating level had a positive effect of high market and competitive position (the company is one of the market leaders with big market shares in the majority of its sales markets), moderately high growth prospects and industry trends.

The Managing Director of Expert RA for Corporate and Sovereign Ratings Pavel Mmitrofanov:

- The operating cash flow in 2016 was RUR 13.3 billion vs. RUR 3.3 billion in the previous year. The total debt burden of the company reduced by RUR 5.6 billion or 9% in 2016 vs. 2015. Those changes had a positive joint effect on the net operating margin of the company, which contributed to increase of its credit rating.

GAZ Group sells via dealer networks at the federal level, which significantly shrinks the sales markets. Besides, the analysts mentioned high quality of the corporate management, strategy-driven business approach and information transparency of the company. A special stress was laid on the high quality of risk-management organization in the company. The operating risk chart and risk insurance policy of the company (all risks are insured at IPJSC Ingosstrakh (А++ from RAEX) and Ingosstrakh - Zhizn Insurance Company, the insurance coverage exceeds the balance sheet value of the tangible assets of the company) have a positive effect on the risk management quality.

The agency emphasizes the external support factors on the part of the government and owners, which had a positive effect on the rating level.

The constraining factors included high currency risks related to high dependence on the import components. However, mid-term plans the company to increase export share in its income, as well as on-going works to localize manufacturing of components can reduce the existing foreign currency disproportions in future, which, in its turn, can have a positive effect on the company margin.

The company liquidity is evaluated by the agency as moderately high. The predicted liquidity ratio was 1.15 at 18-month horizon. The current and absolute liquidity ratios were 0.68 and 0.13, respectively, as of the reporting date.

Reduction of the debt burden of the company by RUR 5.6 billion at the end of 2016 was positively estimated by the agency analysts vs. the beginning of the year. The agency expects further reduction of the debt burden, which, together with the predicted recovery of demand for the company products, can reduce 'net debt/EBITDA' to maximum 3.6 at the end of 2017.