Press Release

VIS Maintains Entity Ratings of Kamal Limited

Karachi, April 12, 2021: VIS Credit Rating Company Limited (VIS) has maintained the entity ratings of Kamal Limited (KL) at ‘A-/A-2’ (Single A Minus/A-Two). The medium to long-term rating of ‘A-’ signifies good credit quality with adequate protection factors. Moreover, risk factors may vary with possible changes in economy. The short-term rating of ‘A-2’ denotes good certainty of timely payments coupled with sound liquidity and company fundamentals. Outlook on the assigned ratings has been revised from ‘Rating Watch-Developing’ status to ‘Positive’. The previous rating action was announced on April 23, 2020.

The ratings assigned to KL take into account the company’s predominant presence in export oriented value-added textile segment, market diversification with fair share in domestic market both in terms of branded and non-branded sales and product portfolio variety involving fabric, home textiles and garments. The in-house integrated facility gives the company a competitive advantage of complete control over the quality and the production process; lately the company has reduced its reliance on procurement of fabric from open market on account of capacity enhancement of both spinning and weaving divisions. Further, the overall business risk profile of the textile industry is supported by stable and growing demand as US-China Trade disruption enhance sales given major buyers continue to diversify procurement. In addition, business dynamics for local textile export players have improved fairly as the competitors from the neighboring countries have been more adversely impacted by supply chain disruptions due to ongoing pandemic. The assessment of financial risk profile incorporates the impact of Covid led boom in local textile sector translating into sizable positive momentum in revenues, improvement in margins leading to healthy profitability indicators and sound debt coverages for KL. Accordingly, the outlook assigned to KL’s ratings has been revised to ‘Positive’. Continuation of growth momentum, going forward, is important from the rating perspective.

Further, reduction in benchmark rates, has translated positively on the bottom line, improving the liquidity position as well. Given concerns of successive waves of Covid-19, the order book for the industry is expected to remain strong in the backdrop of emerging competitive position of textile exports during the ongoing year, subsiding business risk concerns. The ratings are dependent on maintenance of margins, realization of projected targets, incremental cash flow generation and cost savings from recent capital expenditure, exchange risk management, maintenance of leverage indicators coupled with evolution of sector dynamics post ongoing pandemic.

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 or email at info@vis.com.pk .



Faryal Ahmed Faheem
Deputy CEO

Applicable rating criterion: Corporates (May 2019)
https://www.vis.com.pk/kc-meth.aspx

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