Karachi, August 12, 2022 (PPI-OT):VIS Credit Rating Company Ltd. (VIS) has reaffirmed entity ratings of ‘BBB-/A-2’ (Triple B minus /Single A-Two) assigned to Chakwal Textile Mills Limited (DTML). Outlook on the assigned ratings is ‘Stable’. Long-term rating of ‘BBB-’ signifies adequate credit quality with sufficient and reasonable protection factors. Risk factors are considered variable if changes occur in the economy. Short Term Rating of ‘A-2’ signifies good certainty of timely payment, sound liquidity factors and company fundamentals. Access to capital markets is good. Risk factors are small. Previous rating action was announced on April 02, 2021.
Chakwal Textile Mills Limited (CTML) Public Limited (unlisted) Company is primarily engaged in the business of textile spinning through manufacturing different counts of polyester viscose yarn. The Company provides PV yarn products mainly to the domestic market. In the outgoing year the company has installed a 2.5 MW solar power unit fully funded by the UK Government which will meet 25% of the company’s power requirement. This initiative is expected to yield energy cost savings to the company. Installation of another solar unit and wind wheeling is also in the pipeline.
Ratings factor in moderate business risk profile supported by recovery in industry wide exports post ease in COVID-19 lockdown measures. VIS expects the order book for the industry to remain adequate in the ongoing year easing our business risk concerns. However, risk of current macroeconomic and political situation on the overall industry remains.
Assessment of financial risk profile incorporates improvement in revenue base and profitability profile, adequate liquidity profile and conservative gearing levels. Sales revenue of the Company depicted 46% growth in FY21 largely on the back of higher average selling prices. Gross margins of the Company were reported higher due to inventory gains; however with expected stabilization in polyester prices, margins may go down going forward; nonetheless some comfort is built from projected power savings through installation of solar power unit.
Maintaining the same within manageable levels is considered important from a ratings perspective. In line with growth in profitability, liquidity profile of the Company also improved in FY21 with satisfactory cash flow coverage of outstanding obligations. On the capitalisation front, gearing levels increased in 9MFY22 led by incremental debt to finance BMR and extended working capital cycle. Given plans to further expand in the ongoing year, capitalization indicators are expected to trend upwards; however, the same are projected to remain manageable. Ratings remain dependent on maintaining financial risk profile in line with the benchmarks for the assigned 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/