Press Release

VIS Reaffirms Entity Rating of Dynamic Sportswear (Private) Limited

Karachi, July 01, 2024: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Dynamic Sportswear (Private) Limited (‘DSW’ or ‘the Company’) at A-/A-2’ (‘Single A Minus /A-Two’). Medium to long term rating of 'A-' indicates good credit quality; protection factors are adequate. Risk factors may vary with possible changes in the economy. Short-term rating of ‘A-2’ indicates good certainty of timely payment. Liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small. Outlook on the assigned rating is ‘Stable’. Previous rating action was announced on May 25, 2023.

DSW is a family-owned textile manufacturer with an operational history of more than three decades of producing and exporting sports, athletics, medical and casual socks for men, women, and children. It has a vertically-integrated unit that can produce various types of heel formats (y-heel, reciprocated/real, pouch, tube) using modern knitting, toe linking, over-locking, dyeing and finishing machines.
Assigned ratings incorporate the medium business risk profile of the textile sector in Pakistan, marked by exposure to economic cyclicality and intense competition. The sector's performance is notably influenced by broader economic conditions, rendering it susceptible to demand fluctuations driven by economic factors. Furthermore, as a substantial contributor to total exports, the textile industry faces exposure to global economic cyclicality, geopolitical challenges, and liquidity constraints due to lengthy process of sales tax refunds. Supply-side risks, including local cotton crop production and reliance on imported raw materials, expose the sector to significant exchange rate risk.

Assigned ratings consider the Company’s business updates wherein DSW’s revenue in FY23 registered a decline due to lower volumetric sales despite higher selling prices. Gross margins noted an improvement, while net margins remained largely intact. In 9M’FY24, net sales increased, driven by stronger demand, leading to enhanced gross margins and subsequently improved net margins.

The assigned ratings also take into account the Company’s financial risk profile which exhibited volatility in cashflow and debt coverage indicators wherein Debt Service Coverage Ratio (DSCR) deteriorated during the review period, albeit remained adequate. Current ratio slightly improved during the review period. Gearing and leverage indicators also registered improvement on the back of augmentation in equity base. Going forward, further improvement in profitability and liquidity indicators is important from ratings perspective.

For further information on this ratings announcement, please contact at 021-35311861-64 or email at info@vis.com.pk.


Applicable Rating Criteria: Corporates:
https://docs.vis.com.pk/docs/CorporateMethodology.pdf

VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.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 2024 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .