Karachi, VIS Credit Rating Company Limited has reaffirmed the credit ratings of Kamal Limited (KL), maintaining a stable outlook for the textile company based on its latest financial performance and market conditions.
According to VIS Credit Rating Company Limited, Kamal Limited retains its 'A' rating for medium to long-term and 'A-1' for short-term liabilities, indicating good credit quality with adequate protection factors and high certainty of timely payment. The ratings reflect the company's robust operational framework and solid liquidity factors amidst a challenging economic environment. This reevaluation follows the previous rating action taken on April 7, 2023.
Kamal Limited, a family-owned, export-oriented enterprise with a 15-year history in the textile industry, has comprehensive vertical operations encompassing spinning, weaving, dyeing, printing, finishing, knitting, and stitching. The company's product range includes branded and non-branded fabrics, home textiles, garments, and a variety of yarns.
The stable ratings are influenced by the inherent business risks in Pakistan’s textile sector, which faces economic cyclicality and strong competition. Factors such as local cotton production and reliance on imported raw materials contribute to significant exchange rate risks, impacting overall sector stability. Despite these challenges, Kamal Limited demonstrated resilience with improved gross margins from better selling prices and a substantial increase in export sales, particularly in home textiles and fabric during the first half of FY24.
However, financial pressures persist as the company contends with rising operating expenses and finance costs, which have eroded net margins, although they showed some improvement compared to the previous year. The financial risk profile of Kamal Limited remains satisfactory, with adequate debt service coverage and a stable current ratio, despite an increase in gearing and leverage due to higher borrowings compared to equity growth.
The outlook for Kamal Limited's ratings depends on its continued ability to navigate market challenges and achieve projected financial targets without accruing long-term debt as per the management's current strategy.