Shanghai Electric ratings upgraded to Baa2 by Moody’s

Investing.com -- Moody’s Ratings has upgraded Shanghai Electric Holdings Group Co., Ltd. (SEGC) and its key subsidiary, Shanghai Electric Group Company Limited (SHE) to Baa2 from Baa3, with the outlook remaining positive.

The upgrade reflects SEGC’s sustained financial improvement, driven by EBITDA growth and debt reduction, according to Gerwin Ho, a Moody’s Ratings Vice President and Senior Credit Officer.

Moody’s also upgraded SEGC’s Baseline Credit Assessment (BCA) to ba2 from ba3 and SHE’s BCA to ba1 from ba2. The positive outlook indicates Moody’s expects SEGC’s leverage to continue declining over the next 12-18 months, supported by robust orders and management’s debt reduction plans.

SEGC’s Baa2 rating incorporates its ba2 BCA and a three-notch uplift based on the high likelihood of support from the Shanghai government and ultimately the Government of China when needed.

The company’s leverage, measured by adjusted debt/EBITDA, decreased to approximately 5.2x in 2024 from 7.1x in 2023. Moody’s forecasts this will improve to around 4.0x over the next two years, supported by earnings growth and debt reduction.

SEGC maintains a strong backlog to support revenue and EBITDA growth in the next 12-18 months. The company has improved its product mix, leading to increased profit margins.

SHE’s leverage is expected to decline to around 3.5x over the next 12-18 months from 4.0x in 2024, driven by EBITDA improvement and debt reduction.

Both companies have very good liquidity. Their cash and cash equivalents, along with projected operating cash flow, should fully cover debt maturing over the next 18 months. They also have strong access to bank credit due to their state-owned background under the Shanghai government.

Regarding environmental factors, both companies have indirect exposure to thermal power but are increasing their focus on renewable energy products and related services.

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