Press Release

VIS Reaffirms Entity Ratings of Chiniot Textile Mills Limited

Karachi, July 12, 2023: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Chiniot Textile Mills Limited (CTML) at ‘BBB/A-2’ (Triple B/A-Two). Long-term rating of ‘BBB’ signifies adequate credit quality with reasonable and sufficient protection factors. Risk factors are considered variable if changes occur in the economy. Short-term rating of ‘A-2’ denotes good certainty of timely payments coupled with sound liquidity and company fundamentals. Outlook on the assigned ratings is ‘Stable’. Previous rating was announced on June 06, 2022.

Headquartered in Lahore, Chiniot Textile Mills Limited (CTML) is primarily engaged in the production and sale of yarn with total installed capacity of ~31K spindles by end-Dec’23. The ownership of the company is shared among four members of the sponsoring family while presently three are actively involved in business affairs. Production facility is located at District Kasur, Punjab. Power requirement of 5.6MW is met through two sources; national grid and two gas-based generators.

Assigned ratings capture the extensive sponsor experience and revenue growth of 35% in FY22 contributed by higher prices. Margins, however, remain under pressure due to currency devaluation and higher input & financial costs thereby affecting profitability and liquidity profile. In addition, capacity utilization levels dipped during the review period on account of demand constraints. Ratings also incorporate high cyclicality and competitiveness in the spinning sector resulting into higher business risk profile. Going forward, management expects revenue base to gradually increase due to gradual ease in LC constraints and consistent demand of the product which can be easily catered through the incremental available capacity. Liquidity indicators suggest room for improvement with declining debt coverages as a result of lower profitability. On the capitalization front, leverage indicators have increased due to higher quantum of short-term debt drawn and meagre growth in equity base during the review period. Given no plans for expansion, and gradual improvement in profit generation, management expects similar capitalization levels over the rating horizon. Amidst challenging macroeconomic environment, locally and globally, improving margins and cash flow coverages along with maintenance of capitalization indicators will be important from a ratings perspective.

For further information on this rating announcement, please contact Ms. Asfia Amanullah (Ext: 212) or the undersigned (Ext: 207) at (021) 35311861-66 or email at info@vis.com.pk.








Sara Ahmed
Director

Applicable Rating Criteria: Corporates (May 2023)
https://docs.vis.com.pk/docs/CorporateMethodology.pdf

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