Press Release

VIS Reaffirms Entity Ratings to Gohar Textile Mills (Pvt.) Limited

Karachi, April 15, 2025: VIS Credit Rating Company Limited (VIS) reaffirms entity ratings of Gohar Textile Mills (Pvt.) Limited (‘GTML’ or ‘the Company’) at ‘A+/A1’ (‘Single A Plus/A One’). The 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 ‘A1’ indicates Strong likelihood of timely repayment of short-term obligations with excellent liquidity factors. Outlook on the assigned ratings remains ‘Stable.’ Previous rating action was announced on March 11, 2024.

Gohar Textile Mills (Pvt.) Limited (GTML), established in 1995 under the regulatory framework of the Securities and Exchange Commission of Pakistan (SECP), specializes in the production and export of home textiles. The Company operates an integrated manufacturing setup encompassing spinning, weaving, fabric processing, and textile made-ups. GTML has been engaged in manufacturing and exporting a diverse range of fabrics and home textile products. The Company’s registered office is located in Zia Town, Faisalabad, while its main operational units are situated in Tehsil Jhumra, District Faisalabad, with the weaving unit located in Tehsil Gojra, District Toba Tek Singh.

The business risk profile of Pakistan’s textile sector remains a key consideration for GTML’s assigned ratings, given its exposure to economic cyclicality and intense competition. The sector continues to face demand volatility, rising production costs, and regulatory challenges, including the removal of subsidies and increasing energy costs. While global demand has shown some recovery, inflation and competition from regional players continue to dampen profitability. Additionally, fluctuations in raw material availability and foreign exchange volatility pose further risk to the sector’s outlook.

The assigned ratings reflect the Company’s performance, highlighting a consistent upward trend in topline growth over the past four fiscal years. In FY23, a strategic shift toward sourcing a higher proportion of raw materials locally helped mitigate the adverse effects of rupee depreciation. This approach supported inventory gains and contributed to a strong gross margin. However, in FY24, escalating local market prices and rising textile service costs exerted significant pressure on margins, leading to a decline in profitability despite higher sales volumes. The cost pressures persisted into 1QFY25, with further rises in raw material costs straining the cost structure and contracting both gross and net margins.

The ratings also reflect the Company’s financial risk profile, marked by a strategic reduction in debt, improved capitalization, and strong liquidity. While cash generation weakened in FY24, it showed signs of recovery in 1QFY25. Equity expansion, driven by higher profitability led to improvement in gearing and leverage ratios. The Company’s capitalization profile strengthened in FY24, supported by higher retained earnings. Liquidity remained robust, with a four-year average current ratio of 2.15x. Additionally, a strong cash flow coverage profile, including a healthy Debt Service Coverage Ratio (DSCR) further underpins the ratings. Going forward, the ratings remain sensitive to the sustainability of a strong financial risk profile, particularly in terms of cash flow coverage and capitalization.

For further information on this rating 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

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