Lahore, February 20, 2023 (PPI-OT):The ratings reflect Maqbool Textile’s long track record and association with Maqbool Group, a group with a presence in the textile and seed oil extraction industry. Maqbool textile is a public listed company. During FY22, the company added a newly erected MVS spinning unit with 576 MVS spindles to increase its production capacity equivalent to 12,000 conventional ring spindles. The company’s top line displayed a sizeable improvement at PKR 10.3bln (FY21: PKR 7.3bln). The contribution to local sales improved YoY where the exports also recorded an uptick.
The expenses illustrated a higher trend. The net profitability displayed a good increase YoY at PKR 269mln (FY21: PKR 156mln) attributable to higher demand for textile products. The margins and coverages demonstrated a slight improvement. The leveraging inched up attributable to the enhanced equity base recorded at PKR 2.8bln. During 1HFY23, the company’s operating profit witnessed a dip YoY on the back of higher expenses. The finance cost increased manifold and the company recorded net losses of 200mln due to a low demand pattern. The debt structure is skewed towards short-term borrowings. The rating watch has been incorporated attributable to incurred losses and the aforementioned parameters.
During 7MFY23, the textile exports were valued at $10.08bln compared to $10.93bln, reflecting an 8% decline YoY – the declining trend has been recorded in the last few months. The decline in exports is driven by attrition in the demand pattern of export avenues. The hike in cotton prices and low demand for yarn in international markets is also a challenge. The analysis of 5MFY23 reveals that among value-added items, bed wear has witnessed the largest decline of 19% (on an MoM basis), down to $217 million. Knitwear remained on the downward path in October 2022 and declined by 10% to $392 million. Among non-value-added items, the cotton yarn has shown the largest decline of 35%. Moreover, a slowdown is prevailing in textile demand amid burgeoning inflationary pressures in the exporting destinations, especially in the US and European countries. The demand pattern is expected to improve post-Jun-23.
The ratings are dependent upon the management’s ability to improve margins, profitability, and financial profile of the company. This includes avoiding any asset-liability mismatch that may arise and effectively managing its position in a competitive segment. Any deterioration in debt coverages leading to higher financial risk or subdued profitability will have a negative impact on 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
Fax: +92-42-5830425
Email: hammad.rashid@pacra.com
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