Karachi: The VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Dynamic Sportswear (Private) Limited (DSW) at 'A-/A-2', signifying good credit quality with a stable outlook as announced on July 01, 2024. This assessment reflects the company's solid fundamentals and adequate protection factors, despite some vulnerability to economic shifts and market conditions.

According to VIS Credit Rating Company Limited, the ratings reflect DSW’s enduring market presence and robust operational framework within Pakistan's textile sector, characterized by medium business risk. The sector faces cyclical economic conditions and stiff competition, influencing demand and exposing the industry to both domestic and international economic shifts. Factors such as geopolitical challenges, liquidity constraints from delayed sales tax refunds, and dependence on the local cotton supply and imported materials pose significant risks, impacting the sector's stability and performance.

Dynamic Sportswear has managed to navigate these challenges effectively, as demonstrated by its financial activities over the past fiscal year. Despite a drop in revenue in FY23 due to decreased volumetric sales, the company improved its gross margins and maintained stable net margins. The first nine months of FY24 saw a reversal in sales decline, with net sales increasing due to stronger demand, which enhanced both gross and net margins.

The company’s financial health shows signs of both challenges and resilience. While the Debt Service Coverage Ratio (DSCR) has shown some deterioration, it remains adequate. Additionally, improvements were noted in the current ratio and gearing and leverage indicators, bolstered by an increase in the equity base. Looking ahead, VIS notes that further enhancements in profitability and liquidity will be crucial for maintaining or improving the current ratings.