Press Release

VIS Reaffirms Entity Rating of Kohinoor Textile Mills Limited

Karachi, October 23, 2024: VIS Credit Rating Company Limited (VIS) reaffirms the entity ratings of Kohinoor Textile Mills Limited at ‘A+/A-1’ (Single A Plus/A-One). Long-term entity rating of ‘A+’ reflects good credit quality; Protection factors are adequate. Risk factors may vary with possible changes in the economy. Short-term rating of ‘A-1’ reflects strong likelihood of timely repayment of short-term obligations with excellent liquidity factors. Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on October 05, 2023.

Kohinoor Textile Mills Limited (“KTML” or “the Company”), a part of the Kohinoor Maple Leaf Group, operates as a vertically-integrated textile mill, specializing in manufacturing yarn, greige, dyed and printed fabrics, along with an extensive array of home textile products. With more than 70 years of experience, KTML manages the complete production cycle – spinning, weaving, processing, and stitching – supported by a workforce of around 5,900+ employees. Production infrastructure is spread across Rawalpindi and Kasur, with the head office based in Lahore.

Assigned ratings incorporate the medium business risk profile of the textile sector in Pakistan, marked by exposure to economic cyclicality and intense competition. The sector's performance is notably influenced by broader economic conditions, rendering it susceptible to demand fluctuations driven by economic factors. Furthermore, as a substantial contributor to total exports, the textile industry faces exposure to global economic cyclicality, geopolitical challenges, and liquidity constraints due to lengthy process of sales tax refunds. Supply-side risks, including local cotton crop production and reliance on imported raw materials, expose the sector to significant exchange rate risk.

Assigned ratings take into account the Company’s business updates, including increase in Company’s sales in FY23 mainly due to an increase in effective prices and as well as higher sales volume. The Company’s gross margins declined in FY23 and 9MFY24 due to elevated raw material costs and hike in fuel and power cost. Similarly, the Company's net margins remained under pressure due to increased finance costs during the period under review. Looking ahead, the Company expects increased revenue and improved margins with addition in production capacities and adoption of cost cutting measures.

The assigned ratings also account for the Company's financial risk profile. As of March’24, the Company's debt increased due to additional financing obtained to fund the expansion and modernization of production facilities and installation of solar power plants, leading to a slight decline in the capitalization profile; albeit commensurate with the assigned ratings. Going forward, maintenance of manageable capitalization profile will remain an important rating driver.

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


Applicable Rating Criteria: 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 .