Press Release

VIS Assigns Initial Ratings to Sunrise Plastic Industries (Pvt.) Limited

Karachi, March 17, 2022: VIS Credit Rating Company Limited (VIS) has assigned initial entity ratings of ‘BBB/A-2’ (Triple BBB /A-Two) to Sunrise Plastic Industries (Pvt.) Limited (Sunrise). The medium to long-term rating of ‘BBB’ denotes adequate credit quality coupled with reasonable 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 ‘Stable’.

Sunrise is engaged in manufacturing of Plastic Bottles, PET Jars, Plastic Closures (caps), Plastic Jars and Ice-Cream tubs for variety of customers operating in the Home-Care, Personal-Care and Food industry. The assigned ratings take into account the moderate business risk profile of the company emanating from stable clientele in growing bottling and consumer packaged goods industries. Company faces volatility in margins largely due to FX denominated raw materials. Topline depicts client wise concentration, with one client constituting more than two-third of the sales, however, comfort is drawn from long term relationships with those clients. Overall, governance and control framework depicts room for improvement.

Assessment of financial risk profile indicates adequate profitability indicators, weak liquidity and adequate capitalization indicators. Net Sales of Sunrise have grown at a healthy CAGR of 19.7% in the period from end-FY18 to end-FY21. However, gross margins have depicted volatile trend on a timeline basis due to increase in prices of raw materials and rupee devaluation. Net margins have remained thin on a timeline basis. Management’s commitment to increasing sales along with higher consumer demand on account of growing urbanization is expected to bode well for the Company. Working capital management is challenging, however, supported by interest free sponsors and related party loans. Sunrise mobilized long-term loan in the outgoing year to establish manufacturing facility in North which is expected to reduce logistics cost for the Company and serve Punjab market more efficiently. Capitalization indicators stand at comfortable levels. Going forward, improvement in profitability and maintaining adequate leverage indicators along with sustained availability of interest free sponsors and related party loans to support company’s operations will remain important from ratings perspective.

For further information on this rating announcement, please contact the undersigned (Ext: 204) or Sara Ahmed (Ext: 207) at 021-311861-71.

Sara Ahmed

VIS Entity Rating Criteria: Corporates (August 2021)

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