Lahore, September 25, 2023 (PPI-OT): The ratings reflect the established position of Nishat Mills as a premier export-oriented composite unit, with a sizable strategic portfolio and conservative capital structure. The Company enjoys prominence in the textile sector due to the wide array of its products, extensive outreach, and stable customer base. During FY22, the Company’s top line was recorded as historically high attributable to a high demand pattern for textile products. Moreover, a factor of continuous BMR has assisted the Company in maintaining a leading position in the textile universe. The diverse and sizable investment portfolio, emanating from the Company's implicit Holdco status within the Group, generates a regular dividend stream, supporting core income recorded at PKR 3.3bln (FY21: PKR 2.7bln). The company has a moderately leveraged capital structure. The leveraging increased to 34.7% (FY21: 28%) attributable to an incline in short-term borrowings.
The Company's association with Nishat Group as its flagship entity remains a key rating factor. During 9MFY23, the Company’s topline demonstrated a positive growth YoY. The short-term borrowings reflected an unprecedented increase due to the onslaught of macroeconomic challenges and unfavourable prices. The repercussions were reflected in the form of a hike in finance cost. Meanwhile, the Company continues to receive sizable dividend income from its diversified investment portfolio that provides comfort to the ratings. The company’s bottom line clocked at PKR 11.1bln which translated into improved margins. However, the management of coverage and working capital cycle remains essential. The Company is expected to maintain its strong financial profile, going forward.
The ratings are dependent on the Company's ability to sustain its core margins and profitability. Preserving low-leveraged capital structure and sound coverages remains imperative.
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Analyst,
The Pakistan Credit Rating Agency Limited (PACRA)
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Lahore, Pakistan
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