Press Release

VIS Reaffirms Entity Ratings of Chakwal Textile Mills Limited

Karachi, August 11, 2022: VIS Credit Rating Company Ltd. (VIS) has reaffirmed entity ratings of ‘BBB-/A-2’ (Triple B minus /Single A-Two) assigned to Chakwal Textile Mills Limited (DTML). Outlook on the assigned ratings is ‘Stable’. Long-term rating of ‘BBB-’ signifies adequate credit quality with sufficient and reasonable protection factors. Risk factors are considered variable if changes occur in the economy. Short Term Rating of ‘A-2’ signifies good certainty of timely payment, sound liquidity factors and company fundamentals. Access to capital markets is good. Risk factors are small. Previous rating action was announced on April 02, 2021.

Chakwal Textile Mills Limited (CTML) Public Limited (unlisted) Company is primarily engaged in the business of textile spinning through manufacturing different counts of polyester viscose yarn. The Company provides PV yarn products mainly to the domestic market. In the outgoing year the company has installed a 2.5 MW solar power unit fully funded by the UK Government which will meet 25% of the company’s power requirement. This initiative is expected to yield energy cost savings to the company. Installation of another solar unit and wind wheeling is also in the pipeline.

Ratings factor in moderate business risk profile supported by recovery in industry wide exports post ease in COVID-19 lockdown measures. VIS expects the order book for the industry to remain adequate in the ongoing year easing our business risk concerns. However, risk of current macroeconomic and political situation on the overall industry remains.

Assessment of financial risk profile incorporates improvement in revenue base and profitability profile, adequate liquidity profile and conservative gearing levels. Sales revenue of the Company depicted 46% growth in FY21 largely on the back of higher average selling prices. Gross margins of the Company were reported higher due to inventory gains; however with expected stabilization in polyester prices, margins may go down going forward; nonetheless some comfort is built from projected power savings through installation of solar power unit. Maintaining the same within manageable levels is considered important from a ratings perspective. In line with growth in profitability, liquidity profile of the Company also improved in FY21 with satisfactory cash flow coverage of outstanding obligations. On the capitalisation front, gearing levels increased in 9MFY22 led by incremental debt to finance BMR and extended working capital cycle. Given plans to further expand in the ongoing year, capitalization indicators are expected to trend upwards; however, the same are projected to remain manageable. Ratings remain dependent on maintaining financial risk profile in line with the benchmarks for the assigned ratings.

For further information on this rating announcement, please contact Ms. Asfia Aziz (Ext: 212) or the undersigned (Ext: 207) at (021) 35311861-66 or email at info@vis.com.pk.





Sara Ahmed
Director

VIS Entity Rating Criteria: 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 .