Research Update: Tupy S.A. Ratings Raised To 'BB+' On Expectations For Continued Solid Profitability And Low Leverage; Outlook Stable

We expect Brazil-based auto supplier Tupy S.A. to generate solid cash flows in the coming years, from larger scale and business diversification, while maintaining low leverage and strong liquidity. We believe Tupy will expand its EBITDA margin to 13% by 2025, benefiting from the consolidation of Teksid and MWM; an assertive pricing strategy, including a pass-through mechanism protecting the company from cost inflation volatility; and operating optimizations. MWM is less capital intensive than Tupy's other businesses, which will likely enable Tupy to deliver solid free operating cash flows above R$400 million in the next three years. On April 26, 2023, we raised our issuer credit and issue-level ratings on Tupy to 'BB+' from 'BB'. We affirmed our 'brAAA' national scale

...- We expect Brazil-based auto supplier Tupy S.A. to generate solid cash flows in the coming years, from larger scale and business diversification, while maintaining low leverage and strong liquidity. - We believe Tupy will expand its EBITDA margin to 13% by 2025, benefiting from the consolidation of Teksid and MWM; an assertive pricing strategy, including a pass-through mechanism protecting the company from cost inflation volatility; and operating optimizations. - MWM is less capital intensive than Tupy's other businesses, which will likely enable Tupy to deliver solid free operating cash flows above R$400 million in the next three years. - On April 26, 2023, we raised our issuer credit and issue-level ratings on Tupy to '##+' from '##'. We affirmed our 'brAAA' national scale rating. The recovery rating of '3' (65%) remains unchanged. - The outlook on our global scale issuer credit rating is stable, indicating our expectation of a successful integration of MWM and low leverage, with net...

Research Update