Press Release

VIS Credit Rating Company Assigns Initial Entity Ratings to Sunrays Textile Mills Limited

Karachi, December 30, 2019: VIS Credit Rating Company Limited has assigned initial entity ratings of ‘A-/A-1’ (Single A Minus/A-One) to Sunrays Textile Mills Limited (SUTM). Long term entity rating of ‘A-’ reflects good credit quality, adequate protection factors. Risk factors may vary with possible changes in the economy. Short Term Rating of ‘A-1’ indicates high certainty of timely payment, liquidity factors are excellent and supported by good fundamental factors. Risk factors are minor. Outlook on the assigned ratings is ‘Stable’.

SUTM operates through a manufacturing facility located in Muzaffargarh, Dera Ghazi Khan Division with 34,896 spindles installed. The company has historically been operating at high capacity utilization levels. During FY18 and FY19, the company replaced its old Chinese machinery with new Japanese ring frames through BMR thereby enhancing productivity and efficiency of its manufacturing unit. Around three fourth of the yarn is produced on courser counts for Chinese denim manufacturers. The remaining is produced on finer counts for local denim, hosiery and knitwear manufacturers.

Assigned ratings to SUTM incorporate the company’s association with Indus Group of companies which has an established track record in the textile sector and has strong financial profile. Ratings also take into account SUTM’s existing scale of operations, high business risk and strong financial profile. Business risk profile of the spinning sector is considered to be on the higher side due to cyclical and competitive nature of the local industry. However business risk profile is supported by favorable government policies and demand dynamics in the backdrop of ongoing expansion in the value added segment.

Assessment of financial risk profile incorporates improving profitability, liquidity and capitalization indicators. Sales revenue of the Company depicted an increasing trend on a timeline basis with exports comprising around three-fourth of total sales. Exports sales are concentrated in China with local sales directed towards denim, hosiery and knitwear manufacturers. This along with higher gross margins due to efficient procurement translated into improved profitability on a timeline basis. Liquidity profile of the company is considered strong with healthy debt servicing ability and abundant cushion of short term borrowings through stock in trade and trade debts. Going forward, maintaining liquidity indicators at similar levels is considered important from a ratings perspective. Equity base of SUTM has increased over time on account of internal capital generation. Given no further projected increase in long term debt, leverage and gearing indicators are expected to remain within manageable levels. Future trend with respect to leverage indicators will be an important rating consideration.

For further information on this rating announcement, please contact Mr. Talha Iqbal (Ext: 213) or the undersigned (Ext: 201) at (021) 35311861-66 or email at info@vis.com.pk.



Javed Callea
Advisor

Applicable Criteria: Industrial Corporates (May 2016)
http://www.vis.com.pk/docs/Corporate-Methodology-201605.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 2019 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .