Moody's rates Shanghai Huayi Baa3, stable view

Moody's Investors Service said it assigned a Baa3 issuer rating to Shanghai Huayi (Group) Co. (Huayi).

Moody's also said it upgraded Huayi's baseline credit assessment to Ba2 from Ba3.

Moody's also said it withdrew the company's Ba1 corporate family rating.

Moody's also said it upgraded the rating on the backed senior unsecured bond issued by Huayi Finance I Ltd. to Ba1 from Ba2.

The outlook also was changed to stable from positive.

The upgrades reflect Huayi's improving credit profile, including a strengthened market position in the basic chemical industry, improved cost structure and solid credit metrics, Moody's said.

Huayi reported strong earnings in 2018 with adjusted EBITDA up 63% year-on-year, the agency said.

The company achieved stable production volumes, higher selling prices and lower operating costs in its chemical production businesses, Moody's said.

The ratings were offset only partially by modestly lower profits from its green tire and chemical services segments, the agency said.

The ratings also consider the company's large business scale and track record of stable chemical production in the domestic markets, diversified product portfolio and large cash balance and substantial land reserves in Shanghai, Moody's said.

Huayi's credit profile is constrained by the company's primary exposure to the commodity chemicals business, improving but still modest profitability and ongoing capital spending to expand production capacity, the agency said.

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