Karachi, November 18, 2021 (PPI-OT):VIS Credit Rating Company Limited (VIS) has upgraded the entity ratings of Nadeem Textile Mills Limited (NTML) from ‘BBB+/A-2’ (Triple B Plus/A-Two) to ‘A-/A-2’ (Single A Minus/ A-Two). Long term rating of ‘A-’ signifies good credit quality; protection factors are adequate meanwhile risk factors may vary with possible changes in the economy. Short Term Rating of ‘A-2’ indicates good certainty of timely payment. Liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small. Previous rating action was announced on November 13, 2020.
The rating upgrade incorporates the growth in NTML’s topline revenues, following capacity enhancement undertaken last year, in combination with improvement in gross margins. In the latest quarter, the trend of growth in revenues and improvement in gross margins has persisted; albeit the gross margin is expected to normalize for full year (FY22) at slightly higher than FY21 levels. On the back of a managed uptick in business overheads, and stronger gross margin, the net margin has depicted notable improvement and compares favourably to peers. With the uptick in business volume, the debt has not risen in tandem and accordingly debt service coverage has improved on a timeline.
In FY21, despite the strong growth in profitability, payout was maintained on the lower side at 10%. The improved gearing and leverage NTML has been factored into the assigned ratings. Given higher business volumes, utilization of short-term borrowings are projected to increase in the short to medium term, albeit gearing is expected to remain within the benchmark for the assigned rating. As per management, dividend policy is expected to remain aligned with long-term trend, while capital expenditure will also remain limited.
Nadeem Textile Mills Limited (NTML) is engaged in the manufacturing and sale of yarn business for more than three decades and operates via two spinning units located in Nooriabad and Kotri, Sindh. The rating derives impetus from long-standing association of the sponsors with the textile industry.
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/