Scope Ratings affirms AutoWallis’ credit rating

Analysis

Leading European credit rating agency Scope Ratings has affirmed AutoWallis’s “B+” credit rating score. The independent institute also gave the automotive sales company, registered on the Budapest Stock Exchange, a “stable” outlook, despite several factors causing uncertainty in the global economic prospect.

Scope reviewed the rating first assigned to AutoWallis in 2019; the rating on the bonds issued by the company also remained at “B+.” It means that AutoWallis, which listed in the Premium category of the BSE, continues to meet the conditions of the Growth Credit Program (NKP) launched by the National Bank of Hungary.

AutoWallis’ solid market position in Hungary and its regional presence continue to support the rating, Scope argues, although the weak credit metrics, generally low profitability in the automotive retail sector, and low product diversification remain constraints.

To achieve its revenue target, AutoWallis intends to conduct business developments and acquisitions worth HUF 16 billion-38 bln by 2025. Of this amount, only HUF 5 bln has been realized so far, thus Scope expects AutoWallis to rely more on debt to finance transactions.

As AutoWallis has no direct operations in Ukraine or Russia, it is not affected by the associated restrictions or expected losses but could be negatively impacted by potential delays in planned deliveries of cars, Scope notes.

In Q1 2022, the number of vehicles AutoWallis sold increased by 11.1% to 7,410. Total revenues of HUF 57.7 bln were 18.5% higher y.o.y. For the full year 2022, Scope expects revenues to increase to some HUF 217 bln. Scope currently forecasts 2023 revenues to increase by 12% to HUF 242 bln, but much will depend on the market situation, including car production, delivery numbers, and the revenue contribution from newly acquired entities.

Scope views AutoWallis’ liquidity and financial flexibility as adequate. This view is supported by around HUF 17 bln of cash raised during 2021 through an equity increase and the issuance of bonds, resulting in a cash balance of HUF 24.7 bln at the end of December 2021.

The “B+” rating of senior unsecured debt has also been affirmed by Scope to reflect an average recovery rate. AutoWallis now has two bonds issued under the scheme, a HUF 6.7 bln green bond issued in 2021, and a HUF 3 bln bond issued in 2020.

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