Lahore, June 25, 2021 (PPI-OT):The ratings recognize Ghani Chemical Industries Limited’s (GCIL) leading and prominent position in the industrial and medical gases sector in terms of production capacity. The industry largely possesses an oligopolistic structure, benefiting the players. Demand of medical gases in health sector has significantly escalated during third wave of Covid-19 and is expected to sustain in short to medium term. On the other side manufacturing and construction industry has comprehended recovery which led to improved demand for industrial gases. The company was able to capitalize growth from (a) Underutilized free capacity, which was available as a result of 3rd 110TPD plant expansion (b) price rationalization of medical and industrial gases also witnessed from financial performance of the company recorded in 9MFY21. Company’s margins, coverages and working capital cycle showed improvement at all levels.
Cash flows of the Company also posted a healthy growth. All three plants are operational with higher capacity utilization. Capacity expansions are underway and currently the Company is setting up its fourth 105TPD dedicated plant which will cater the need of a renowned big industrial customer through a long term sale contract and would play a vital role towards top-line and bottom line growth. GCIL also intends to setup the largest 275TPD plant in KPK in future as well.
Going forward the Company is expected to receive benefits from (a) rising demand from industrial and medical gases which will be translated into better financial performance and are evident in future financial projections (b) Capacity expansions with new plants and enhancement of current % utilization to ensure maximum production (c) reduce reliance towards borrowings from financial institutions with rationalize leveraging policy (d) stock exchange listing to capitalize future growth. The Company is contemplating to issue a short term commercial paper, as bridge finance, for another expansion project. This will be repaid through internal sources and/or other equity sources.
The ratings are dependent on the Company’s ability to effectively utilize enhanced capacities. At the same time, management of financial risk, particularly debt coverages, remains important, wherein any further deterioration would have negative implications for the ratings. Consistent growth in market share and improved margins would support ratings.
For more information, contact:
Analyst,
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore, Pakistan
Tel: +92-42-5869504-6
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Email: hammad.rashid@pacra.com
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