The credit rating of «SEAP NAMED AFTER SERGO ORDZHONIKIDZE», PJSC (hereinafter, the Company, or the Plant) has been upgraded to reflect improved scores for the Company’s size (now, it is assessed as below medium, since FFO before net interest and taxes is above RUB 500 mln) and leverage.
The credit rating is based on the strong business profile, medium level of corporate governance, and weak geographic diversification of sales markets. The financial risk profile assessment reflects very high profitability, strong liquidity, low leverage, medium debt coverage, weak cash flow, and the below medium size of the Company.
The Company operates in the field of aviation instrumentation. The Plant is a supplier of avionics for the majority of aircraft models manufactured in the former USSR, the CIS, and the Russian Federation. In order to diversify its business, the Company is implementing projects for the production of critical communication systems and fine chemicals.
key assessment factors
Medium operational risk profile. The Company is a competitive player in the aviation instrumentation market. The Plant is a monopolist in certain areas, and is entering new markets — critical communications and fine chemicals. The Company’s stable financial indicators stem from a substantial contract portfolio, as well as a wide technology base and low dependence on subcontracting. The Company largely controls the entire production chain, which results in a high business profitability. The production cycle includes development (including research and design), manufacture, and warranty and post-warranty service. The Company’s sales markets have moderate cyclicality and saturation. The current conditions of geopolitical uncertainty and the need to form a domestic civil aviation fleet create increased demand for the Plant’s products, while the launch of production of critical communication systems and fine chemicals strengthens the Company’s role in the implementation of priority national import substitution programs. The Company is consistently carrying out its strategy, which involves creating a science-intensive and high-tech instrument-engineering enterprise. The Company’s risk management system is formalized. There are standards in place that regulate the procedure for planning and assessing the effectiveness. The board of directors has an audit committee, an audit commission, and an internal control and internal audit service.
The Company’s size is assessed as below medium. In 2024, the Plant’s revenue reached RUB 3.6 bln vs. RUB 1.8 bln in 2023 following output growth. FFO before net interest and taxes weighted for 2022–2027 amounted to RUB 780 mln, which is assessed as below medium as per the Agency’s methodology. The FFO before interest and taxes margin grew to 22.3% last year, while the weighted indicator for 2022–2027 is estimated by ACRA at 21%.
Low leverage and medium coverage. The weighted average ratio of total debt to FFO before net interest for 2022–2027 is 1.6x vs. 2.6x a year earlier. This improvement is explained by the growth of FFO before net interest amid the Company’s debt obligations remaining at RUB 1.2 bln in 2024. In the forecast period of 2025–2027, the credit portfolio is expected to decline below RUB 1 bln on the back of a gradual increase in FFO before net interest. The interest coverage (the ratio of FFO before net interest to interest) amounted to 4.7x in 2024 vs. 2.4x in 2023.
Strong liquidity and weak cash flow. The Company benefits from diversified sources of liquidity, including bank credit lines and capital market instruments, as well as comfortable settlement terms with a high share of advance payments from customers. However, significant expansion of operations in 2024 led to an increase in working capital and an outflow of funds required to finance it. The FCF margin amounted to 19.4% by the end of 2024, and the weighted FCF margin for 2022–2027 is expected to be 0.9%. The Company is continuing to implement its investment program aimed at technical re-equipment and upgrade of its process equipment. According to ACRA’s estimates, the annual capex will not exceed 10% of revenue in 2025–2027.
key assumptions
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Annual average revenue growth of at least 10% in 2025–2027.
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The total volume of investment program in 2025−2027 not exceeding RUB 800 mln.
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No dividend payments in 2025−2027.
potential outlook or rating change factors
The Stable outlook assumes that the rating will highly likely stay unchanged within the 12 to 18-month horizon.
A positive rating action may be prompted by:
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The weighted ratio of total debt to FFO before net interest declining below 1.0x and the weighted average FCF margin exceeding 2%;
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The ratio of FFO before net interest to interest exceeding 8.0x.
A negative rating action may be prompted by:
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The weighted FFO before interest and taxes margin declining below 15%;
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The weighted ratio of FFO before net interest to interest declining below 2.5x;
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The weighted ratio of total debt to FFO before net interest exceeding 2.0x;
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The weighted ratio of capex to revenue exceeding 10%.
rating components
Standalone creditworthiness assessment (SCA): bbb+.
Support: none.
issue ratings
No outstanding issues have been rated.
regulatory disclosure
The credit rating has been assigned under the national scale for the Russian Federation based on the Methodology for Credit Ratings Assignment to Non-Financial Corporations under the National Scale for the Russian Federation and the Key Concepts Used by the Analytical Credit Rating Agency within the Scope of Its Rating Activities.
The credit rating of «SEAP named after Sergo Ordzhonikidze», PJSC was published by ACRA for the first time on August 20, 2020. The credit rating and its outlook are expected to be revised within one year following the publication date of this press release.
The credit rating was assigned based on data provided by «SEAP named after Sergo Ordzhonikidze», PJSC, information from publicly available sources, and ACRA’s own databases. The credit rating was assigned based on the RAS financial statements of «SEAP named after Sergo Ordzhonikidze», PJSC. The credit rating is solicited, and «SEAP named after Sergo Ordzhonikidze», PJSC participated in its assignment.
In assigning the credit rating, ACRA used only information, the quality and reliability of which were, in ACRA’s opinion, appropriate and sufficient to apply the methodologies.
ACRA provided additional services to «SEAP named after Sergo Ordzhonikidze», PJSC. No conflicts of interest were discovered in the course of credit rating assignment.
