SAIC Motor Corporation Ltd – Risk Profile
- As per GlobalData’s proprietary risk methodology, SAIC Motor’s overall risk score is 3.09, signifying medium risk
- Above sector average, country and operational risk pillars boosted the company’s overall risk profile
- Low liquidity and a high debt to EBITDA ratio compared to its peers negatively impacted the financial risk scores
SAIC Motor Corporation Ltd (SAIC Motor) has a moderate risk profile based on our proprietary risk assessment of vehicle manufacturing sector in the automotive industry. The country risk pillar strengthened the overall risk score for the company. A substantial scale of operations is a strength for the company, but the geographic concentration and high debt to EBITDA could be causes of concern.
About the Company
SAIC Motor, a subsidiary of Shanghai Automotive Industry Corporation, manufactures passenger cars and commercial vehicles. The company provides a range of components such as engines, gearboxes, powertrains, chassis, interior, exterior, and other miscellaneous electronic components. It also offers logistics, mobility, auto E-commerce, energy-saving, and recharging services, auto-related finance, insurance, and investment.
SAIC Motor is one of the leaders in the automotive industry, with reported revenue of $120.90 billion in the financial year 2021 (FY2021), an annual growth of 12.42%. Net income also grew by 28.47% in FY2021.
Risk Pillars
Our proprietary risk assessment uses a combination of four risk pillars – Country, Industry, Operational, and Financial. The risk scores are based on a scale of 1 to 5, 1 being the lowest risk and 5 being the highest.
SAIC Motor’s overall risk score is in-line with the sector average, driven by country risk pillar. Companies like Subaru, Hero Motor Corp, Porsche, and Geely are the leaders in the sector.
Country Risk:
SAIC Motor operates in the US, the UK, and Asia. However, nearly 92.7% of its revenue is generated from China, resulting in a country risk score of 4.00. The geographical concentration of the company’s revenues increases its business risks by exposing it to the economic and geopolitical risks associated with the country. It could affect the demand for its products or disrupt the supply chain and restrict its market share and growth opportunities in the future.
Industry Risk:
The company’s primary exposure is to the vehicle manufacturing sector. Strong revenue growth characterizes the vehicle manufacturing sector, but low-profit margins and higher cyclicity hinder the sectors, resulting in an average industry score of 3.00.
Operational Risk:
SAIC Motor has an operational risk score of 3.26. The above sector average scores are driven by the scale and operational efficiency pillars. The company manufactures and sells over 6 million vehicles per year and generates a healthy average profit per vehicle, resulting in above-average scale and operational efficiency pillars. However, low EBIT margins and a limited number of brands weigh down the profitability and business positioning pillars.
Financial Risk:
The company has a financial risk score of 2.47, below the sector average. Despite a healthy inventory turnover, low current and quick ratios impacted the company’s overall liquidity profile. Mid-single-digit profitability margins affected the company’s cash flow ratios. Compared to its peers, high debt to EBITDA remains a cause for concern.
About our Methodology
GlobalData risk scorecard for a sector provides the analysis of various risks a company is vulnerable to. Our risk framework comprises four pillars – country, industry, operational and financial. The country risk for an entity signifies the risk of operating in a particular country. GlobalData’s proprietary country risk assessment framework is used to calculate the risk for individual countries. Industry risk is an integral part of risk analysis, and it implies the riskiness and stability of the industries in which a company operates. The operational and financial risk profile comprises a company’s risk and return potential based on its key operational and financial metrics. Our scores are based on an average of the latest three fiscal year data.
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