Press Release

VIS Credit Rating Assigns Initial Entity Ratings to JK Dairies (Private) Limited

Karachi, January 04, 2023: VIS Credit Rating Company Limited (VIS) has assigned initial entity ratings of ‘BBB+/A-2’ (Triple B Plus/ A-Two) to JK Dairies Private Limited. The medium to long term rating of ‘BBB+’ signifies adequate credit quality, protection factors are reasonable and sufficient. Risk factors are considered variable if change occur in the economy. The short-term rating of ‘A-2’ denotes 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 ratings is ‘Stable’.

The ratings assigned to JKD take into account the company’s association with JK group having business interests in sugar, agriculture and power. The ratings incorporate moderate business risk environment underpinned by growing demand of milk coupled with complementary demand prospects of dairy products in line with population growth & higher per capita consumption. Further, business risk for JKD is moderate given around two-thirds of sales being carried out on business-to-business model. Assessment of financial risk profile incorporates improvement in profitability emanating from higher sales, and consolidation of capitalization indicators. Gross margins have depicted improvement on the back of organic growth in herd size yielding economies of scale, revision in rates with buyer and higher retail prices of other products including sugarcane, rhode grass and livestock sold by the company. The liquidity position is supported by short cash conversion cycle and is considered fair for coverages against outstanding obligations. However, improvement in current ratio is needed. Leverage indicators have depicted improvement on a timeline basis on account of profit retention; however, the same continue to be higher than peers. The leverage indicators are further expected to increase going forward in order to finance expansion in herd size, purchase of land for construction of sheds and milking parlors, and to fund BMR and working capital requirements. The ratings will remain sensitive to maintaining capitalization and liquidity profiles at acceptable levels while improving debt service coverages, going forward.

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 (Ext. 207) or email at info@vis.com.pk.


Javed Callea
Advisor

Applicable rating criterion: Corporates (August 2021)
https://docs.vis.com.pk/docs/CorporateMethodology202108.pdf

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