Press Release

VIS Credit Rating Company Assigns Initial Entity Ratings to Yunus Textile Mills Limited

Karachi, June 28, 2019: VIS Credit Rating Company Limited has assigned initial entity ratings of ‘AA-/A-1+’ (Double A Minus/A-One Plus) to Yunus Textile Mills Limited. Long Term Rating of ‘AA-’ denotes high credit quality and strong protection factors. Risk is modest but may vary from time to time because of economic conditions. Short Term Rating of ‘A-1+’ signifies high certainty of timely payment; Short term liquidity, including internal operating factors and/or access to alternative sources of funds, is outstanding and safety is just below risk free Government of Pakistan’s short term obligations. Outlook on the assigned ratings is ‘Stable’.

The assigned ratings reflect Company’s leading market position, vertically integrated operations, diversified balance sheet, favorable business risk dynamics and strong financial risk profile. Ratings also reflect strong sponsor profile with YTML being a wholly owned subsidiary of YB Holdings (Pvt.) Limited. Yunus Brother’s Group has robust financial profile with diversified presence in sectors including power generation, building materials, real estate, textile, chemicals, pharmaceuticals, food and automotive sectors. Ratings remain dependent on maintaining strong financial profile and low leveraged capital structure.

YTML is amongst the leading home textile exporters in the country with a market share of around 9% in total textile made-up exports. The company enjoys strong franchise and is recognized as a quality product manufacturer with product line ranging from bed sheets, comforters, duvets, quilts, and pillow cases to curtains and table linens. Major export markets include USA, UK, France, and Sweden. Clients include a mix of fashion brands and top-tier retailers who have had a lengthy relationship with YTML. The assigned ratings incorporate favorable industry dynamics as evident from supportive government policies, improving perception (opening of visa regimes) and law and order situation and expected gradual shifting of orders from other key regional countries. Resultantly, management has embarked on capacity and efficiency enhancement across the value chain. A sizeable portion of the capex is expected in enhancing end-product capacities.

Assessment of financial profile incorporates strong profitability and liquidity profile and healthy capitalization indicators. Topline depicted healthy growth in FY18 with growth momentum projected to continue over the rating horizon. Profitability profile has strengthened during the ongoing year due to improved margins, exchange gain and higher dividend income from investments. Liquidity profile is strong as evident from healthy cash flows and strong coverages. Despite debt draw down to fund expansion, cash flow coverages are projected to remain strong over the rating horizon. Low leverage indicators and conservative financial policy depicts strong capitalization profile. Given expansion plans, leverage indictors are projected to increase slightly but will continue to remain sound.

For further information on this rating announcement, please contact the undersigned (Ext: 201) at 35311861-70 (10 lines) or fax to 35311873.

Javed Callea

Applicable Criteria: Industrial Corporates (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 2019 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

VIS Credit Rating Company Limited