Press Release

VIS Credit Rating Company Reaffirms Entity Ratings to Lucky Textile Mills Limited

Karachi, November 11, 2020: VIS Credit Rating Company Limited has reaffirmed entity ratings of Lucky Textile Mills Limited (LTML) at ‘AA-/A-1’ (Double A Minus/A-One). Long Term Rating of ‘AA-’ denotes high credit quality; protection factors are strong. Risk is modest but may vary slightly from time to time because of economic conditions. Short Term Rating of ‘A-1’ signifies high certainty of timely payment; liquidity factors are excellent and supported by good fundamental protection factors. Outlook on the assigned ratings is ‘Stable’. Previous rating action announced on November 18, 2019.

The assigned ratings reflect Company’s strong sponsor profile as the company is a wholly owned subsidiary of YB Holdings (Pvt.) Limited. Yunus Brother’s Group has a strong financial profile with diversified presence in sectors including power generation, building materials, real estate, textile, chemicals, pharmaceuticals, food, entertainment and automotive sectors. The assigned ratings reflect Company’s diversified balance sheet, sound operational infrastructure, existing business risk dynamics and strong financial risk profile.

LTML is engaged in manufacturing and exports of various kinds of textile products. The company enjoys strong franchise value and is recognized as a quality product manufacturer with product line ranging from bed sheets, comforters, duvets, quilts, pillow cases to curtains, table linens and apparels. The company mainly exports its products to EU countries and USA wherein clients include a mix of distributors, top-tier retailers and fashion brands. Although client wise concentration is witnessed in sales, this risk is partially mitigated due to long term association with existing clients. Overall revenues have displayed a healthy 5-Yr CAGR of 14% from FY16-FY20. Sales displayed a notable growth during FY20 despite COVID-19 while stable gross margins support business outlook. Focus will remain on the business growth amid higher expected demand; re-emergence of Covid-19 in key export markets remains a risk.

The assigned ratings incorporate favorable industry dynamics as indicated by supportive government policies, improving perception (opening of visa regimes) and law and order situation. Management has embarked on capacity and efficiency enhancement across the value chain. Operational infrastructure including management information systems, IT infrastructure, and machinery remains key strength of the company.

Assessment of financial profile indicates strong profitability and liquidity profile coupled with healthy capitalization indicators. Liquidity profile is strong as evident from healthy cash flows and strong coverages. Despite debt draw down to fund expansion, cash flow coverages are projected to remain strong over the rating horizon. Low leverage indicators and conservative financial policy depicts strong capitalization profile. Maintenance of low leveraged capital structure and strong cash flow coverages are considered important from a ratings perspective.

For further information on this rating announcement, please contact the undersigned (Ext: 207) at 35311861-70 (10 lines) or fax to 35311873.



Javed Callea
Advisor

Applicable Criteria: Industrial Corporates (April 2019)
https://s3-us-west-2.amazonaws.com/backupsqlvis/docs/Corporate-Methodology-201904.pdf

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 2020 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .