Karachi, July 26, 2021 (PPI-OT):VIS Credit Rating Company Limited (VIS) has upgraded entity ratings of Shahbaz Garments (Private) Limited (SGL) to ‘A-/A-2’ (Single A Minus/A-Two) from ‘BBB+/A-2’ (Triple B Plus/A-Two). Long term rating of ‘A-’ signifies good credit quality; Protection factors are adequate. Risk factors may vary with possible changes in the economy. Short term rating of ‘A-2’ signifies good certainty timely payment. Liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small. Outlook on the assigned ratings has been revised to ‘Stable’ from ‘Rating Watch – Negative’. Previous rating action was announced on April 30, 2020.
The rating upgrade takes into account SGL’s significant improvement in margins, leverage indicators and debt coverage levels on a timeline basis together with a sizeable liquidity present on the books. The Company is well aligned in peer group given its healthy margins and conservative capital structure. Moreover, ratings continue to factor in the strong Group strength and Company’s specialized business of industrial gloves with long-standing clients, integrated production facilities and comprehensive product suite. This along with SGL’s relatively better positioning in comparison to small-scale glove producers provides comfort to business risk profile. Going forward, management plans to expand capacity of its spinning and glove manufacturing facilities by ~50% at a total estimated cost of Rs. 1.3b. The project will have a debt to equity ratio of around 60:40 and is expected to come online by 1Q’22.
Despite the debt draw down planned for expansion, leverage indicators are expected to remain within manageable levels on account of projected improvement in equity base. Profitability margins have depicted a rising trend over the last four consecutive years on the back of efficient procurement, production efficiencies and enhanced focus on higher margin products. Going forward, margins are expected to sustain while growth in profitability will be a function of projected increase in production volumes. Ratings remain dependent on continued maintenance of sound performance and financial indicators.
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/