Press Release

VIS Maintains Entity Ratings of Master Textile Mills Limited

Karachi, September 02, 2021: VIS Credit Rating Company Limited (VIS) has maintained entity ratings of Master Textile Mills Limited (MTML) at ‘A/A-1’ (Single A /A- One), Outlook on the assigned ratings has been revised from ‘Rating Watch Developing’ to ‘Stable’. The medium to long-term rating of ‘A’ denotes good credit quality with adequate protection factors. Moreover, the risk factors may vary with possible changes in economy. The short-term rating of ‘A-1’ denotes high certainty of timely payment, liquidity factors are excellent and supported by good fundamental protection factors. The previous rating action was announced on April 28, 2020.

The revision in outlook incorporates enhanced financial profile of the company during FY21 in the backdrop of the overall growth observed in Pakistan’s textile industry. The local textile players have benefitted from the diversion of orders from the neighboring countries facing more severe COVID-19 led disruption. Also, the Government of Pakistan has laid strong emphasis on exports and provided incentives in the form of preferential energy rates and low interest rate financing schemes to boost the textile exports of the country.

Assessment of the financial risk profile indicates healthy profitability, strong liquidity profile and sound capitalization indicators. Ratings take into account continued growth in revenues in FY21 on the back of volumetric growth in sales and higher average selling prices. MTML’s revenues are primarily export based with garments and dyed fabric constituting a major portion of total sales. While fashion garment industry was impacted by COVID-19 induced disruption, MTML shifted its focus on work wear garments and continued the growth momentum during the outgoing year.

Gross margins of the company were maintained amid input price increases on the back of efficient procurement, production efficiencies, and focus on value-added products. Higher net profit was achieved during FY21 on account of growth in sales, reduced finance cost coupled with limited growth in operating overheads. Liquidity profile of the company is considered strong in light of healthy cash flows and sound debt coverage ratios.

Going forward, gross margins are expected to sustain while growth in profitability will be a function of volumetric increase in sales. Capacity expansion across all segments has been planned primarily focused on backward integration. This expansion will be funded through SBP concessionary schemes. Maintaining leverage levels in line with assigned ratings post expansion with strengthening of financial indicators would be important going forward.

For further information on this rating announcement, please contact Ms. Sara Ahmed (042-35723411-13, Ext. 207) and/or the undersigned at 021-35311861-66 (Ext. 201) or email at info@vis.com.pk .


Javed Callea
Advisor



Applicable rating criterion: Corporates (August 2021)
https://www.vis.com.pk/kc-meth.aspx

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