Press Release

VIS Reaffirms Entity Ratings of Thal Limited

Karachi, December 18, 2024: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Thal Limited (‘THAL’ or ‘the company’) at ‘AA/A1+’ (Double A/A One Plus). Medium to long-term rating of ‘AA’ reflects 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 ‘A1+’ signifies strongest likelihood of timely repayment of short-term obligations with outstanding liquidity factors. Outlook on the assigned ratings remains ‘Stable’. Previous rating action was announced on January 15, 2024.

Ratings draw strength from strong financial profile and diversified presence of the company. THAL is engaged in the production of auto parts, jute, WPP (woven polypropylene) and paper bags and laminate sheets. In addition, THAL has established market position and track record in auto parts industry along with technical collaborations with leading international players. The ratings take into account diversified business risk profile that include auto parts, building materials and packaging products along with investments in ThalNova Power Thar (Private) Limited (TNTPL) and Sindh Engro Coal Mining Company Limited (SECMC) in addition to recurring dividend income related parties.

Due to the economic slowdown in FY23 and FY24, the auto sector witnessed sharp decline, leading to lower auto parts sales of THAL. However, the company continues to develop and supply components for both existing and new vehicle models. Meanwhile, packaging segment sales also decreased in FY24 due to supply chain disruptions and reduced demand, however, favorable product mix, local sourcing, export growth, and automation in the packaging mitigated some cost-pressures.

Substantial contraction in sales volume across most business verticals resulted in a decline in net sales for FY24. Despite drop in profitability, debt coverage profile remained robust. Moreover, a sound liquidity profile was observed during the review period. While an increase in long-term debt was undertaken to fund specific investments in power projects, the company maintained a conservative capital structure. Looking ahead, sales growth, margin improvement, and maintaining low leveraged capital structure will be important to remain aligned with the assigned ratings.

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 .