Press Release
VIS Assigns Initial Entity Ratings to Nishat Chunian Limited
Karachi, March 26, 2021: VIS Credit Rating Company Limited (VIS) has assigned initial entity ratings of ‘A/A-2’ (Single A /A-Two) to Nishat Chunian Limited (NCL). The medium to long-term rating of ‘A’ denotes good credit quality, with adequate protection factors. Moreover, risk factors may vary with possible changes in the economy. The 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’.
The ratings assigned to NCL take into account the company’s association with Nishat Chunian Group; one of the leading groups in Pakistan with sizable financial strength. The ratings incorporate diversification of revenue stream into spinning, weaving and made up segments; however, the reliance on spinning still remains significant. Therefore, ratings factor in high cyclicality and competitive intensity for spinning segment along with volatility in cotton prices which translate into moderate to high business risk profile. On the other hand, holistically business risk profile of the textile industry is supported by stable and growing demand as US-China Trade disruption enhance sales given major buyers continue to diversify procurement.
Assessment of financial risk profile incorporates the impact of Covid led boom in local textile sector translating into positive momentum in revenues, healthy profitability indicators and comfortable debt coverages for NCL. The ratings are sensitive to narrow margins, volatility in liquidity profile, relatively high leverage indicators and sustainability of dividend income. Even though concerns of more waves of Covid-19 remain elevated, VIS expects the order book for the industry to remain strong in the ongoing year, subsiding business risk concerns. The ratings are dependent on improvement of margins, realization of projected targets, incremental cash flow generation and cost savings from recent capital expenditure, maintenance of leverage indicators coupled with evolution of sector dynamics post ongoing pandemic.
For further information on this rating announcement, please contact Ms. Maham Qasim (042-35723411-13, Ext. 8010) or email at info@vis.com.pk
Executive Director
Saeed Khan
Applicable rating criterion: Corporates (May 2019)
https://s3-us-west-2.amazonaws.com/backupsqlvis/docs/Corporate-Methodology-201904.pdf