Press Release

VIS Reaffirms Entity Rating of Kohinoor Textile Mills Limited
 

Karachi, July 22, 2022: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity rating of ‘A+/A-1’ (Single A plus/ Single A-One) assigned to Kohinoor Textile Mills Limited (KTML). Outlook on the assigned rating is ‘Stable’. The long term rating signifies good credit quality with adequate protection factors. The short-term rating of ‘A-1’ signifies high certainty of timely payment, liquidity factors are excellent and supported by good fundamental protection factors. Risk factors are minor. Previous rating action was announced on January 20, 2021.

Ratings take into account Kohinoor Textile Mills Limited (KTML) association with Kohinoor Maple Leaf Group. The Group has a presence in textile, cement, power generation and investment management. KTML has a vertically integrated setup and is principally engaged in the manufacturing of yarn and cloth, processing & stitching the cloth and trade of textile products. Existing manufacturing facilities of KTML comprise two spinning units, one weaving unit and a home textile unit. As of FY21, Group’s consolidated revenues were reported to be Rs. 65.5b (FY20 Rs. 50.8b).

The assigned ratings take note of the Company’s growth in revenues led by higher commodity prices and volumetric increase in sales in FY21. With textile sector demand staying strong, the growth momentum has continued in FY22. Higher growth was primarily recorded in spinning segment, which continued to be the largest contributor, constituting 48% of total sales. Local sales quantum increased significantly contributing to more than half of the total sales mix. Akin to the spinning sector, gross margins of the Company also recorded notable increase primarily driven by inventory and exchange gains. Ratings also factor in continuous investment in expansion and modernization of manufacturing facilities which has also contributed towards topline growth and margin improvement. The Company is in the process of installing additional capacities to its spinning and weaving segments and are expected to come online by 2QFY23.

Assessment of financial profile depicts improvement in profitability and capitalization profile, however, liquidity indicators remain adequate. Funds from Operations (FFO) increased on account of higher profitability which consequently improved cash flow coverages. Capitalization indicators also improved on the back of growth in profitability and profit retention. While short term debt utilization decreased due to healthy cash flow generation, long term debt was higher on account of financing of capital expenditures. Nevertheless, gearing and leverage indicators remain sound. Liquidity profile of the Company remains adequate. Improvement in current ratio and short term debt coverage was noted in FY21 and 9MFY22, however, the same do not commensurate with the assigned ratings. Sustainability and further improvement in liquidity profile of the Company remains important for ratings. Moreover, maintaining topline growth, sustaining margins and maintenance of gearing and leverage within reasonable levels will remain important over the rating horizon.

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



Sara Ahmed
Director

Applicable Rating Criteria: Corporates (August 2021)
https://docs.vis.com.pk/docs/CorporateMethodology202108.pdf

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Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS , the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2022 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

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