Press Release

VIS Reaffirms Entity Ratings of H.A Fibres (Pvt.) Limited

Karachi, June 23, 2022: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of H.A Fibres (Pvt.) Limited(HAFL) at ‘A-/A-2’ (Single A Minus/A-Two).The medium to long-term rating of ‘A-’ denotes good credit quality coupled 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 payment coupled with sound company fundamentals and liquidity factors. Outlook on the assigned ratings is ‘Positive’. The previous rating action was announced on June07, 2021.
Ratings assigned to HAFL factor in positive outlook on textile industry on account of higher demand of local products in export markets coupled with additional support to the industry on the regulatory front. The ratings have built in high cyclicality and competitive intensity of spinning segment along with volatility in cotton prices which translate into moderate to high business risk profile. Utilization levels exhibited positive trajectory due to sizeable jump in demand of specialty yarn. Furthermore, ratings draw comfort from the ongoing and planned increase in production capacities of the company to cater to increasing demand which are expected to support profitability and yield operational efficiencies going forward.

The ratings take into account improvement in the financial risk profile of the company marked by positive momentum in revenues, sizable and largely sustained margins, significant quantum of share of profit from associate booked, sound liquidity profile and substantial debt-service coverage. The significant improvement in margins during the rating review period was an outcome of increased sale of specialized yarn entailing premium pricing as opposed to normal combed/carded yarn along with high inventory gains stemming from timely procurement of raw material at lower average cost. The ratings incorporate that majority of the company’s sales are categorized as indirect export; therefore, the company has access to concessionary financing schemes introduced by the central bank; the same reflects positively on the bottom line, however, may be impacted by the recent revision of interest rates on concessionary finance. Going forward, sales are expected to escalate on account of adequate orders in pipeline along with expansion of scale of operations. Further, the ratings factor in conservative capital structure with limited reliance on long-term borrowings. Leverage indicators exhibited an improvement on a timeline basis despite incremental long-term funding procured to fund capex pertaining to capacity expansion, and remained well placed in the assigned peer group. With support from profit retention the capitalization indicators are expected to strengthen going forward. Ratings remain dependent upon sustained margins, incremental cash flow generation and cost savings from recent capital expenditure, maintenance of leverage indicators at intended capex and of achievement of projected sales growth.

For further information on this rating announcement, please contact Ms. Maham Qasim (042-35723411-13, Ext. 8010) and/or the undersigned at 021-35311861-66 (Ext. 207) or email at info@vis.com.pk.


Sara Ahmed
Advisor

Applicable rating criterion: Corporates (August 2021)https://docs.vis.com.pk/docs/CorporateMethodology202108.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 2022 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .