General

VIS Assigns Positive Outlook to Entity Ratings of Naveena Exports Limited

Karachi, February 25, 2022 (PPI-OT):VIS Credit Rating Company Limited (VIS) has maintained the entity ratings of Naveena Exports Limited (NEL) at ‘A/A-1’ (Single A/ A-One). Long term rating of ‘A’ signifies good credit quality; protection factors are adequate. Risk factors may vary with possible changes in the economy. The short-term rating of ‘A-1’ signifies high certainty of timely payment. Liquidity factors are excellent and supported by good fundamental protection factors. Risk factors are minor. Outlook on the assigned ratings is ‘Positive’. Previous rating action was announced on February 23, 2021.

NEL’s rating incorporates strong revenue growth, superior and stable profitability margins and adequately high cash flow coverage of debt. Having been in the business for over three decades, NEL has established itself as a leading denim sector exporter. With revenue base diversified between exports and indirect exports, the same depicts diversification, while country-wise concentration is also considered manageable. Superior gross margins, in combination with adequately low financial risk profile, and expansion envisaged by the management, has translated in a positive outlook for NEL.

In FY21, NEL’s gross margin depicted some contraction, given changes in product mix, albeit the trend has reversed in H1’FY22. Going forward, margins are expected to remain strong during the rating horizon. Given stable net margin, growing offtake and full profit retention, equity base has grown at a CAGR of 20.7% during the last 5 years. (FY17-FY21). In H1’FY22, the equity base has contracted, given carving out of Naveena Steel. Nevertheless, gearing remains adequately low and is expected to recede back to historical levels, on the back of full profit retention.

Corporate Governance infrastructure in place in NEL is adequate, specifically given NEL’s operational status as a Private Limited Company. The rating could benefit from listing of NEL, which would support the Corporate Governance score assigned to the Company.

For more information, contact:
Director Compliance and Rating Analytics,
VIS Credit Rating Company Limited
VIS House, 128/C, 25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi, Pakistan
Tel: +92-21-35311861-72
Fax: +92-21-35311873
Email: bilal@jcrvis.com.pk
Website: https://www.vis.com.pk/

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