Lahore, December 02, 2021 (PPI-OT):The ratings reflect Kingcrete’s extensive experience in the civil construction business. The firm has exhibited renewed energy ever since the induction of the second generation. The ratings reflect Kingcrete’s improved business fundaments as anticipated, with growth in revenue and margin. During FY21, the top line witnessed a growth of 82% (FY 21: 5.4bln, FY20: 2.98bln).
The gross profit and net profit margins remained at 19% and 4.2% respectively (FY 20: 20% and 2.7%), aided by good repute in the market and extensive experience of the management. As the entire income is tender-based, revenue depends on the firm’s ability to bid successfully.
Therefore the working capital requirement also depends on the project in execution; wherein performance guarantees are essential. This leads to a high dependence on bank lines to fund working capital. The firm is adequately leveraged and the performance rests with projects in hand and timely completion.
The equity base is strong and is mostly represented by a portfolio of investment property indicating sound loss absorption capacity; the same along with available cash balances and ongoing projects which span a number of years ensuring revenue generation in the coming years, support the financial risk profile of Kingcrete.
However, an upsurge in basic raw material prices and increased policy rates are posing a challenge. The ratings will remain dependent on upholding financial metrics involving the timely completion of key commercial projects without any significant cost and time overruns.
In addition, maintenance of a healthy project pipeline and collection efficiency, as projected, will remain crucial to ratings. Governance and corporate structure require up-gradation and improvement and so does financial discipline. The management has an express mandate to corporatize its structure while improving the reporting of its financial performance on a quarterly and annual basis.
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
Fax: +92-42-5830425
Email: hammad.rashid@pacra.com
Website: www.pacra.com