Karachi, February 16, 2023 (PPI-OT):VIS Credit Rating Company Limited (VIS) has assigned initial entity ratings of ‘A-/A-2’ (Single A minus/A-Two) to Gatron (Industries) Limited. Medium to long-term rating of ‘A-’ signifies good credit quality with adequate protection factors. Moreover, risk factors may vary with possible changes in economy. Short-term rating of ‘A-2’ denotes good certainty of timely payments coupled with sound liquidity and company fundamentals. Outlook on the assigned ratings is ‘Stable’.
Incorporated in 1980, Gatron is a public listed company involved in the manufacturing of Polyester Filament Yarn (PFY) and PET Preforms in Pakistan with its plant located at Hub, Baluchistan. The Company forms part of the G and T group, which has been in existence for over seven decades having presence in various sectors including textile, plastic resin and power generation. Leading group companies include Novatex Ltd (PET Resin and Preforms), Mustaqim Industries (home textiles), Bonanza, Krystalite (PET Sheet and Thermoforming products). The Group is an established market player with sound financial standing.
Assigned ratings take into account well established market position of the Company in the PFY market with consistent growth history, however business risk of the Company remains heightened due to strong competitive pressures in the industry due to lack of effective implementation of anti-dumping duties, constraining margins of the Company. Ratings also incorporate sound group profile and Corporate Governance framework of the Company. Being part of the large group the Company benefits from the synergies derived in terms of access to capital and raw materials as well as pricing benefits.
The Company is in an expansionary phase, with new capacities expected to contribute towards revenue diversification and higher efficiencies. However, expansionary capex has resulted in elevated debt levels with further drawdowns in the pipeline. Given increasing interest rates, higher financing together with higher energy costs are expected to keep debt servicing under pressure.
Consequently, projected margins over the rating horizon are expected to remain constrained, supported by dividend stream from subsidiary i.e., Gatro Power, dependent upon gas supply for economical operations. Going forward, amidst economic slowdown, higher competition and elevated gearing, achievement of projected revenues while improving margins and capitalization profile of the Company will be important for ratings.
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/