Service Long March Tyres (Pvt.) Limited

CREDIT RATING REPORT | Jun-25

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Rating History
Dissemination Date Long-Term Rating Short-Term Rating Outlook Action Rating Watch
27-Jun-25 A+ A1 Stable Maintain -
11-Dec-24 A+ A1 Stable Upgrade -
27-Jun-24 A A1 Stable Upgrade -
27-Jun-23 A- A2 Stable Initial -
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 and sale of all-steel radial tyres for buses and trucks in Pakistan. The Company’s ownership is a split between Chaoyang Long March Tyre Company Limited (~44%), Service Industries Limited (~22.09%), Service Global Footwear Limited (~18.91%), Service Tyres (Private) Limited (~10.00%) and Mr. Shabir Ahmad (~5.0%). The board of SLM Tyres comprises 9 members, including Mr. Jin Yongsheng (Chairman) and Mr. Omar Saeed (CEO).

Rating Rationale

The ratings reflect the robust business and operational profile of Service Long March Tyres (Private) Limited (“SLM Tyres” or “the Company”). Operating under the umbrella of the well-established Service Group, SLM Tyres is a strategic joint venture between Service Industries Limited (SIL)—one of Pakistan’s leading manufacturers of footwear and tyres—and Chaoyang Long March Tyre Company Limited (LM), a globally recognized Chinese manufacturer of all-steel radial tyres. This collaboration enabled a full-scale technology transfer and led to the establishment of Pakistan’s first dedicated manufacturing facility for all-steel truck and bus radial (TBR) tyres. The facility is strategically located in the Special Economic Zone (SEZ) of the Sindh (S.I.T.E), Nooriabad, allowing for efficient nationwide distribution and streamlined export logistics. Since commencing commercial production in March 2022, the Company has demonstrated rapid operational growth. It has developed a robust nationwide distribution network and established a growing footprint in international markets by offering high-quality products that meet global standards. This strategic synergy has positioned SLM Tyres as a prominent player in the regional tyre industry. Operating in a competitive market landscape, primarily dominated by imported tyre brands, SLM Tyres has captured a notable ~55% share of the domestic market. On the export front, the Company has also gained momentum. Notably, recent tariff adjustments by the U.S. are expected to benefit SLM Tyres, as competing exporters from Vietnam and Thailand are now subject to higher import duties in the U.S. market. In CY24, the Company reported a year-on-year revenue growth of ~68%, with total sales reaching PKR 44,882 million. This growth was primarily driven by increased volumetric sales. SLM Tyres' strong financial and operational performance is reinforced by a sound governance framework and a competent management team. The leadership brings a wealth of industry expertise and diverse experience, ensuring strategic direction and operational efficiency across all business functions. Looking ahead, SLM Tyres is well-positioned for sustained growth. Phase II of the Company’s capacity expansion is underway and aims to increase annual production capacity to ~1.6 million tyres. Plans for Phase III remain intact, targeting a total installed capacity of ~2.4 million tyres per annum. These expansions are aligned with rising domestic demand and the management’s strategy to broaden its global footprint. The Company’s financial risk profile is considered strong, characterized by comfortable debt coverage metrics, healthy cash flows, and an efficient working capital cycle. The capital structure remains leveraged, with a mix of long-term and short-term borrowings utilized for capacity expansion and working capital needs. A significant portion of these borrowings has been secured through concessionary financing schemes.

Key Rating Drivers

The ratings are dependent upon the Company’s ability to sustain its growth trajectory in revenue and maintain a healthy profitability matrix while upholding strong financial discipline. The materialization of the envisaged strategy shall also remain imperative to the ratings.

REPORT CONTENTS
  1. Rating Analysis
  2. Financial Summary
  3. Rating Scale
  4. Regulatory Disclosure

Service Long March Tyres (Pvt.) Limited

rating analysis

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Profile
Legal Structure

Service Long March Tyres (Private) Limited (‘SLM Tyres’ or ‘the Company’) was incorporated in Pakistan on January 7th, 2020 as a private limited entity under the Companies Act, 2017. SLM Tyres is the first greenfield project in Pakistan to manufacture All-Steel Radial Tyres. The Company’s registered office is located at Service House, Main Gulberg, Lahore.


Background

SLM Tyres is a subsidiary of Service Industries Limited (SIL). SIL entered into a joint venture agreement with Chaoyang Long March Tyre Company Limited – a Chinese Company and with Mr. Shabir Ahmad of Myco Corporation, Pakistan to establish Pakistan's first Radial Tyres manufacturing facility in Sindh Industrial Trading Estate (S.I.T.E), Nooriabad, Sindh. Commercial production of the project commenced in March 2022.


Operations

The Company uses the latest technology known as All Steel Radial manufacturing with complete in-house research facilities and the capability to manufacture finished products from scratch. Looking ahead, SLM Tyres is well-positioned for sustained growth. Phase II of the Company’s capacity expansion is underway and aims to increase annual production capacity to ~1.6 million tyres. Plans for Phase III remain intact, targeting a total installed capacity of ~2.4 million tyres per annum. Currently, SLM Tyres capacity utilization has been reported to be around 90%.


Ownership
Ownership Structure

SLM Tyres is a joint venture between Chaoyang Long March Tyre Company Limited (~44%), Service Industries Limited (~22.09%), Service Global Footwear Limited (~18.91%), Service Tyres (Private) Limited (~10%), and Mr. Shabir Ahmad (~5.0%).


Stability

The ownership structure seems stable as no major change in the pattern of shareholding is expected in the near future. A major stake of ~51% rests with the entities of Service Group.


Business Acumen

Service Group and Chaoyang Long March Tyre Co. Ltd. (prime sponsors of SLM Tyres) are considered to have strong business acumen. Both of them have been operating in and outside their regions for several decades.


Financial Strength

SLM Tyres being the entity of Service Group maintains a healthy financial profile with substantial access to domestic and international markets. This indicates the sponsors’ ability to provide support is considered good if the need arises. As of CY24 Service Group's consolidated asset bases stands at ~PKR 62.2bln, while consolidated revenue is recorded at ~PKR 125bln.


Governance
Board Structure

The board of SLM Tyres comprises nine members, including the Chairman – Mr. Jin Yongsheng, CEO – Mr. Omar Saeed, and seven Non-Executive Directors - Mr. Arif Saeed, Mr. Hassan Javed, Mr. Chaudhry Ahmed Javed, Mr. Badar Ul Hassan, Mr. Zhang Xingyou, Mr. Yang Shuping, and Mr. Li Qingwen. There are no independent directors on the board.


Members’ Profile

Five members involved in the business are representatives of Service Group whereas the remaining four members are representatives of Chaoyang Long March Tyre Company – a leading Chinese manufacturer of radial tyres. All the directors on the board have related industry exposure of more than two decades.


Board Effectiveness

The board has formed no sub-committees, thus hampering effective governance. However, board meetings are held quarterly in compliance with the principles of corporate governance, and all meeting minutes are documented properly.


Financial Transparency

M/S. A F Ferguson & Co, listed in category ‘A’ on SBP’s panel of auditors, are the external auditors of the Company. They expressed an unqualified opinion on the Company's financial statements for the period ending June 30th, 2024.


Management
Organizational Structure

A well-defined organizational structure exists within the Company. All the functions are reporting directly or indirectly to the CEO. These are: 1) Commercial & Sales, 2) Technical, 3) Production Operations, 4) Finance & Accounts, and 5) Support Services. Each department is headed by a qualified HOD.


Management Team

Mr. Omar Saeed, the CEO of SLM Tyres, is a graduate of Brown University and he did his Master’s in Business Administration from Harvard Business School. Mr. Omar has also served as the CEO of Service Industries Limited (SIL) from 2011 to 2018 and on the boards of various private and public companies in the past. The other key members involved in the business are also thorough professionals with substantial experience in diversified sectors.


Effectiveness

With the support of an experienced team of professionals, SLM Tyres is building up its business strengths and increasing its footprint across different cities of Pakistan and also tends to reach export markets in the near future.


MIS

The Company is presently using Oracle EBS ERP. It has multiple operational modules to keep track of daily and monthly reports required by the management to ensure the desired level of effectiveness.


Control Environment

For operational efficiency and appraisal of internal controls, the Company has an in-house team of qualified professionals at all levels to implement and monitor the policies and procedures. SLM Tyres has an effective
mechanism for the identification, assessment, reporting and mitigation of all types of risks arising from the business operations.


Business Risk
Industry Dynamics

The estimated market size of the Tyres Sector in FY24 stood at PKR~198.3bln (FY23: PKR~158.2bln). Key players in the tyre sector include Ghandhara Tyre and Rubber Company, Panther Tyres Ltd, Service Industries Ltd and Service Long March Tyres Pvt Ltd. The demand drivers of the tyre sector in Pakistan can be broadly segmented into the OEM and replacement markets where the average share of the replacement market is ~80%. The major raw material used in the production of tyres is rubber, both natural and synthetic. The market for radial tyres in Pakistan's trucks and buses segment has been experiencing steady growth over the years. The sector is experiencing a gradual shift towards radial tyres due to their superior performance, longer lifespan, better fuel efficiency, and improved safety.


Relative Position

Service Long March Tyres (Pvt.) Limited is Pakistan’s first All-Steel Radial Trucks & Buses Tyres manufacturer to successfully launch a greenfield project. The Company has emerged as an important import substitution in the country’s radial tyres market for commercial vehicles.


Revenues

As per the segment wise financial disclosures (consolidated) of the holding company SIL, the Company has continued its growth trajectory and reported a sound growth in topline of ~68% with a recorded revenue of 44,882mln PKR as of CY24 (CY23: 26,768mln), reflecting a strong performance. This growth was primarily driven by increased volumes, both in terms of local sales as well as exports.


Margins

As per the segment-wise financial disclosures (consolidated) of the holding company SIL, the Company demonstrated a significant improvement in profitability during the calendar year 2024 (CY24). Net profit surged to PKR 6,997 million, compared to PKR 2,506 million in CY23, demonstrating 15.5% net profit margin in CY24 as compared to 9.4% in CY23.


Sustainability

The radial tyres market in Pakistan is highly competitive owing to tyres smuggled through grey channels and the large no. of radial tyres imported every year, but SLM Tyres is expected to gain its market share by successfully reaching its full plant capacity in the coming years. A joint venture with Chaoyang Long March Tyre Company shall bring additional support at all levels. The Company intends to expand its footprint as an exporter of radial tyres for commercial MVs.


Financial Risk
Working capital

The Company has shown clear progress in managing its working capital more efficiently. Improvements in inventory and receivables management have led to a noticeable reduction in the overall working capital cycle. This reflects stronger internal controls, better forecasting, and a more disciplined approach to operational financing. The efficiency gains achieved during the previous fiscal year have largely been sustained in the current period, indicating a consistent focus on optimizing cash flow and resource allocation. These developments demonstrate the company's commitment to operational excellence and prudent financial management.


Coverages

The Company maintained strong operational cash flows, with a notable improvement in free cash flow generation compared to the previous year. This positive momentum continued into the current fiscal period, contributing to a solid liquidity position. Improved earnings capacity was reflected in a stronger ability to meet interest obligations, demonstrating enhanced financial stability. Additionally, the Company's debt-servicing capability showed marked improvement, highlighting greater financial flexibility and a healthier balance between earnings and financing commitments. These developments underscore the effectiveness of the company’s financial management strategies and its ongoing focus on strengthening its capital structure.


Capitalization

The Company has sustained a balanced leverage position, with continued improvement in its capital structure over the recent period. A steady decline in borrowing levels reflects ongoing deleveraging efforts and a clear commitment to prudent financial management. By maintaining a thoughtful blend of long-term and short-term financing instruments, including concessional facilities, the Company supports its growth initiatives while ensuring financial stability. This disciplined approach to capital structuring underscores its focus on sustainable expansion and risk-conscious decision-making.
 
 

Jun-25

www.pacra.com

Service Long March Tyres (Pvt.) Limited

rating scale

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Jun-25

www.pacra.com

Service Long March Tyres (Pvt.) Limited

regulatory disclosure

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  1. Rating Team Statements
    1. Rating is just an opinion about the creditworthiness of the entity and does not constitute a recommendation to buy, hold, or sell any security of the entity rated or to buy, hold, or sell the security rated, as the case may be. (Chapter III; 14-3-(x))
    2. Conflict of Interest
      1. The Rating Team or any of their family members have no interest in this rating (Chapter III; 12-2-(j))
      2. PACRA, the analysts involved in the rating process, and members of its rating committee and their family members do not have any conflict of interest relating to the rating done by them (Chapter III; 12-2-(e) & (k))
      3. The analyst is not a substantial shareholder of the customer being rated by PACRA [Annexure F; d-(ii)]
      4. Explanation: for the purpose of the above clause, the term "family members" shall include only those family members who are dependent on the analyst and members of the rating committee.
  2. Restrictions
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    3. PACRA does not make proposals or recommendations regarding the activities of rated entities that could impact a credit rating of the entity subject to rating. (Chapter III; 10-7-(k))
  3. Conduct of Business
    1. PACRA fulfills its obligations in a fair, efficient, transparent, and ethical manner and renders high standards of services in performing its functions and obligations. (Chapter III; 11-A-(a))
    2. PACRA uses due care in the preparation of this Rating Report. Our information has been obtained from sources we consider to be reliable, but its accuracy or completeness is not guaranteed. PACRA does not, in every instance, independently verify or validate information received in the rating process or in preparing this Rating Report. (Clause 11-(A)(p))
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    3. PACRA discloses that no shareholder directly or indirectly holding 10% or more of the share capital of PACRA also holds directly or indirectly 10% or more of the share capital of the entity which is subject to rating or the entity which issued the instrument subject to rating by PACRA. (Chapter III; 12-2-(f))
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Jun-25

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