Press Release

VIS Reaffirms Entity Ratings of Master Textile Mills Limited

Karachi, November 04, 2022: VIS Credit Rating Company Limited (VIS) has reaffirmed entity ratings of Master Textile Mills Limited (MTML) at ‘A/A-1’ (Single A/A-One). Outlook on the assigned ratings is ‘Stable’. The medium to long-term rating of ‘A’ denotes good credit quality with adequate protection factors. Moreover, the risk factors may vary with possible changes in economy. The short-term rating of ‘A-1’ denotes high certainty of timely payment, liquidity factors are excellent and supported by good fundamental protection factors. The previous rating action was announced on September 02, 2021.

Assigned ratings factor in MTML being a part of ‘Master Group of Industries’ which has diversified presence across various business sectors including foam and spring mattresses, engineering, automobiles, chemicals and energy sectors. Ratings reflect the business risk in the wake of looming global recession, including commodities super-cycle, rising inflation, and monetary tightening in major economies. Textile export orders growth in Pakistan, as a result, is expected to slow down in the medium-term. This, combined with the country's ongoing energy crisis and rising production costs, poses a challenge to the sector's margin sustainability and future growth over the rating horizon. However, in the long-run, improvement through value addition, investment in technology and optimization of energy cost would define the future of textile exports. Materialization of projected targets amidst subdued local and global macroeconomic environment will be important.

Assessment of the operational and financial risk profile incorporates successful completion of planned expansion across the value chain, healthy profitability and liquidity profile and sound capitalization indicators. Double-digit growth in revenue was attributable to both volumetric growth in US and Europe markets along with prices appreciation. Going forward, full year impact of enhanced capacities, rupee devaluation and focus towards sale of value-added products is expected to bode well for the topline of the company. Profitability profile of the company improved on the back of efficient inventory procurement, economies of scale through higher volumetric sales, rise in dollar based selling prices, enhanced focus on high margin value-added products and support from dividend income on investments. Ratings take into account strong liquidity profile in light of healthy cash flows and sound debt coverage ratios. With higher debt levels to finance expansion and working capital needs, gearing and leverage indicators remain elevated. Going forward, improvement in capitalization indicators and maintenance of profitability profile will remain important for ratings.

For further information on this rating announcement, please contact the undersigned or Ms. Asfia Aziz (Ext: 212) or the undersigned (Ext. 207) at 92-21-35311861-70 or fax to 92-21-35311873.







Sara Ahmed
Director

Applicable rating criterion: Corporates (August 2021)
https://www.vis.com.pk/kc-meth.aspx

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