Karachi, January 31, 2022 (PPI-OT):VIS Credit Rating Company Limited (VIS) has maintained the entity rating of Shafi Lifestyle (Pvt.) Ltd (SLPL) at ‘BBB+/A-2’ (Triple B-Plus/Single A-Two). Outlook on the assigned rating has been changed from ‘Stable’ to ‘Positive’. The long-term rating signifies adequate credit quality; protection factors are reasonable and sufficient. Risk factors are considered variable if changes occur in the economy. Short term rating of ‘A-2’ depicts good certainty of timely payment. Liquidity factors and company fundamentals are sound with good access to capital markets. Risk factors are small.
The ratings take note of the sound profile of the sponsor, Shafi group, and their extensive experience in leather industry. Revision in rating outlook takes into account growth in revenues and improvement in margins. Ratings incorporate SLPL’s business risk profile which is supported by volumetric growth in exports of leather footwear industrywide. Ratings also take note of SLPL’s improving market position relative to competitors, increased production on the back of continuous capacity enhancements and focus on high-margin segments of the market. However, the Company remains exposed to client concentration risk; which becomes more pronounced due to the volatility in the high-end segment of the industry.
During FY21, topline of SLPL grew on the back of higher volumes and impact of currency devaluation, outpacing the industry growth. Margins have remained strong and continue the upward trend on the back of greater economies of scale and enhanced cost control, which has resulted in improved cash flow coverage and debt servicing capability. Liquidity indicators also remain satisfactory. Increased total debt levels have pushed up the gearing, albeit remaining in a manageable range.
Ongoing capital expenditure will exert some pressure on gearing levels going forward, however capitalization indicators are expected to remain sound on account of higher projected profitability. The Company is in the process of implementation of a fully integrated ERP platform which is expected to enhance operational efficiencies. Going forward, sustaining topline growth along with maintenance of margins and sound capitalization indicators 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/