Press Release

JCR-VIS Assigns Initial Ratings to Shahkam Industries (Pvt.) Limited

Karachi, December 21, 2018: JCR-VIS Credit Rating Company Limited (JCR-VIS) has assigned initial entity ratings of ‘BBB/A-2’ (Triple B /A-Two) to Shahkam Industries (Pvt.) Limited (SIL). The medium to long-term rating of ‘BBB’ denotes adequate credit quality coupled with reasonable protection factors. Moreover, risk factors are considered variable if changes occur in the economy. The short-term rating of ‘A-2’ denotes good certainty of timely payments. Liquidity factors and company fundamentals are considered sound. Outlook on the assigned ratings is ‘Stable’.

SIL is an export-oriented knitwear and ready-made garment manufacturing unit. The assigned ratings take into account the experience of sponsors in the textile sector and established business relations with the large multinational clothing retailers. The up-scaling of production processes and product diversification have facilitated customer retention given competitive environment. SIL has been able to attain growth in business on a timeline basis also supported by rupee devaluation and export package continuity. The ratings, however, are constrained by declining trend in profit margins amidst high cost of doing business, low pricing power, and stiff competition. During FY18, topline augmented on the back of a marginal increase in the average selling prices and re-profiling of customers. While gross margins decreased given low pricing power, liquidity and leverage indicators marginally improved supported by higher duty drawback. Going forward, given financial risk increasing with higher gearing and leverage to fund expansion, profitability and cash flow position will be dependent on the successful execution of business expansion projects and eligibility for export incentives.

For further information on this rating announcement, please contact the undersigned at 021-35311861-70 or Mr. Maimoon Rasheed at 042-35723411-13.

Jamal Abbas Zaidi

Applicable rating criterion: Industrial Corporate (May, 2016)

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 not an NRSRO and its credit ratings are not NRSRO credit ratings.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 2018 VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to VIS.

JCR-VIS Credit Rating Company Limited