Press Release

VIS Reaffirms Entity Ratings of Artistic Milliners (Private) Limited

Karachi, December 28, 2021: VIS Credit Rating Company Limited (VIS) has reaffirmed entity ratings of ‘AA-/A-1’ (Double A Minus/A-One) to Artistic Milliners (Private) Limited (AML). Long Term Rating of ‘AA-’ reflects high credit quality, strong protection factors, and moderate risk but may vary slightly because of economic conditions. Short Term Rating of ‘A-1’ indicates high certainty of timely payment, excellent liquidity factors supported by good fundamental protection factors and minor risk factors. Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on December 02, 2020.

AML is one of the leading denim fabric and garment manufacturers and exporters with vertically integrated operations in Pakistan. The Company deals in manufacturing of yarn, denim fabric and denim garments. The assigned ratings incorporate AML’s market positioning as the third largest exporter of Pakistan for FY21. Primarily a denim sector player, the ratings take into account business risk of denim sector and regional & counterparty concentration inherent in AML’s revenue base. Recently, the management has made foray towards diversifying to non-denim fabric, which should translate in improvement in business risk profile of AML going forward.

Ratings take into account consistent uptick in capacities, topline, stability of margins and comfortable cash flow coverage indicators. During the past 5-year period (FY17-FY21), the Company’s topline has grown at a CAGR of 16%. At the same time, the margins have depicted stability and improvement over a timeline. Cash flow coverage indicators have remained strong and aligned with peer median. Given capacity growth and increase in commodity prices, the management projects strong revenue growth for FY22, which has been incorporated into our analysis. Cash conversion cycle has tipped up on a timeline, albeit this is in line with industry trend and is mainly attributable to sharp increase in raw cotton pricing.

Rating incorporates conservative capital structure of AML, with debt utilization being conservative, as reflected by the gearing & leverage levels. The Company’s debt is almost entirely composed of financing under SBP’s concessionary debt financing scheme. Furthermore, the Company has sizable liquidity available on the balance sheet, which has largely been placed in money market mutual funds. In addition to enhancing the liquidity buffers of AML, these placements also diversify AML’s revenue base. Including the liquid assets in debt calculations, net debt of the Company stands comfortably low. Going forward, with limited debt drawdown, strong internal capital generation and adequate retention, gearing is expected to remain comfortable.

For further information on this rating announcement, please contact Mr. Arsal Ayub, CFA or the undersigned (Ext: 306) at 021-35311861-71 or fax to 021-35311872-3.





Faryal Ahmad Faheem
Deputy CEO

VIS Entity Rating Criteria: Corporates (August 2020)
https://www.vis.com.pk/kc-meth.aspx

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