Press Release

VIS Assigns Initial Ratings to Kamal Textile Mills (Pvt.) Limited

Karachi, April 25, 2022: VIS Credit Rating Company Limited (VIS) has assigned initial entity ratings of ‘A-/A-2’ (Single A Minus/A-Two) to Kamal Textile Mills (Pvt.) Limited (KTML). The medium to long-term rating of ‘A-’ denotes good credit quality coupled with adequate protection factors. Moreover, risk factors may vary with possible changes in the economy. The short-term rating of ‘A-2’ denotes good certainty of timely payment coupled with sound company fundamentals and liquidity factors. Outlook on the assigned ratings is ‘Stable’.

KTML is an export-oriented textile unit primarily involved in production and sale of madeups, garments and processed fabrics. The ratings derive strength from robust growth in topline in the outgoing year largely emanating from higher volumetric sales while gross margins decreased due to largely stagnant average selling prices amidst highly competitive export market, and increase in cost of sales. Liquidity is considered adequate in terms of cash flow coverages. Net operating cycle has remained manageable over time relative to industry median. Leverage indicators increased notably due to uptick in borrowings, though remained at fairly comfortable level. Equity base has been strengthened on a timeline basis on the back of profit retention and interest free loan from sponsors, which is payable at discretion of the company. The company is in process of implementing an expansion plan entailing vertical integration of its apparel division. The company started its garments stitching unit in the last quarter of FY20 and has subsequently added dyeing and knitting operations in the ongoing year. The management has also embarked upon capex related to fabric processing for its apparel division which is expected to be come online by end-FY23. Going forward, garments sale is expected to be a major revenue driver. Positive outlook of the textile sector on the back of higher demand in export markets, coupled with additional support to the industry on the regulatory front bodes well for KTML. Meanwhile, ratings would remain sensitive to maintenance of liquidity and capitalization indicators at comfortable levels and any further deterioration in these would have an impact on ratings. In addition, achieving projected revenue growth and maintaining profit margins amidst rising cost of sales and operating costs would remain imperative.

For further information on this rating announcement, please contact Ms. Tayyaba Ijaz, CFA at 042-35723411-13 (Ext. 8004) and/or the undersigned at 021-35311861-66 (Ext. 306) or email at info@vis.com.pk


Faryal Ahmad Faheem
Deputy CEO


VIS Entity Rating Criteria: Corporates (August 2021)
https://docs.vis.com.pk/docs/CorporateMethodology202108.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 2022 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .