Press Release

VIS Reaffirms Entity Ratings of Sunrays Textile Mills Limited

Karachi, October 25, 2024: VIS Credit Rating Company Limited (VIS) reaffirms entity ratings of Sunrays Textile Mills Limited (SUTM’ or ‘the Company’) at 'A-/A-1' (Single A minus/A-One). Medium to long term rating of 'A-' indicates good credit quality; Protection factors are adequate. Risk factors may vary with possible changes in the economy. Short-term rating of 'A-1' indicates Strong likelihood of timely repayment of short-term obligations with excellent liquidity factors. Outlook on the rating is “Stable’’. Previous rating action was announced on September 28, 2023.

SUTM is a part of the Indus Group of Companies which is a sizeable player in the country’s textile business. Within the textile sector, Indus Group has over five decades of experience and operates through five entities. The group is primarily engaged in the business of cotton ginning, yarn spinning, and home textiles (primarily towel business). Furthermore, the group also has a presence in the power sector through exposure in wind power project of 50MW by the name of Indus Wind Energy Limited. Principal activities of SUTM include trade, manufacture and sale of yarn.

Assigned ratings take into account the medium to high business risk profile of the textile sector in Pakistan, influenced by challenging local and global economic conditions, intense competition, and high exposure to economic cyclicality. The sector’s performance remains susceptible to demand fluctuations, global geopolitical challenges, and liquidity constraints due to delays in government sales tax refunds. Additionally, supply-side risks, including local cotton crop production and reliance on imported raw materials, expose the industry to exchange rate risk.

Assigned ratings also incorporate the Company’s financial risk profile. Despite a significant increase in sales, the Company's margins have faced pressures due to rising input costs, particularly from escalating energy costs. Gross margins while remaining under pressure reported a slight improvement due to increased efficiency from new machinery. The capitalization profile, while historically conservative, has seen an increase in gearing and leverage ratios due to ongoing capacity expansion projects and higher working capital needs. Liquidity remains sound, supported by a stable current ratio, though coverage metrics have been constrained compared to historical average due to higher finance costs and strained operational profitability. Nonetheless, the Company’s liquidity and coverage profiles remain aligned with the assigned ratings.

Going forward, ratings will be sensitive to the company’s ability to manage input cost pressures and improve profitability margins. Additionally, maintenance of gearing and liquidity metrics in commensurate with the assigned ratings will be important considerations for future reviews.

For further information on this ratings announcement, please contact at 021-35311861-64 or email at info@vis.com.pk.









Applicable Rating Criteria:
Industrial Corporates
https://docs.vis.com.pk/docs/CorporateMethodology.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.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 2024 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .