Karachi, February 25, 2022 (PPI-OT):VIS Credit Rating Company Limited (VIS) has reaffirmed entity ratings of Mustaqim Dyeing and Printing Industries (Pvt.) Ltd (MDPIPL) to ‘A-/A-2’ (Single A Minus/Single A-Two). Rating outlook remains ‘Stable’. Long Term Rating of ‘A-’ reflects good credit quality with adequate protection factors. Risk factors may vary with possible changes in the economy. Short Term Rating of ‘A-2’ signifies good certainty of timely payment, sound liquidity factors and company fundamentals, and good access to capital markets. Risk factors are small. The previous rating action was announced on January 18, 2021.
MDPIPL is engaged in the manufacturing and sale of yarn, home textiles, towels, and socks in the local as well as foreign markets. The company is part of G and T group that has over six decades of experience in various industries including textile, plastic and resin. Assigned ratings take into account extensive experience of sponsors, long-standing relationship with clients and well aligned marketing strategy in its export market in the post pandemic market environment which is expected to strengthen the financial metrics given the successful implementation of the expansion plan.
Assigned ratings take into account the recovery in operating performance during 1HFY22, as revenue growth was subdued in FY20 and FY21 because of COVID-19 induced shutdowns across the globe. Despite a significant increase in raw material prices over the last year, the company was able to maintain its gross margins. However, net profit margins remained under pressure due to a one-off exchange loss and higher finance costs. Given projected increase in debt levels to finance expansion, finance cost may impact the overall profitability profile of the company.
Improving profitability indicators for the assigned ratings is important from a ratings perspective. Liquidity profile depicts some room for improvement, as cash flow coverages remain on the lower side as compared to peers despite some improvement during 1HFY22. Debt servicing coverage is sufficient though, with trade receivables and inventory also providing adequate cover against short-term borrowings.
Going forward, improvement in cash flow indicators will be important to maintain assigned ratings. Capitalization indicators increased in the outgoing year given substantial increase in the quantum of debt to finance the ongoing BMR project. Issuance of loan by the sponsors has helped in maintaining leverage levels in the ambit of the assigned ratings. With further injection of debt expected going forward, noticeable improvement in profitability along with consistent sponsor support to service debt obligations would be needed to maintain these indicators from a ratings perspective.
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/