November 22, 2023 (MLN): The VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Lucky Textile Mills Limited (LTML) at ‘AA-’ for long-term and ‘A-1’ for the short term with a stable future outlook, the latest press release issued by VIS showed.
Medium to Long-term entity rating of ‘AA-‘ reflects high credit quality; Protection factors are strong. Risk is modest but may vary slightly from time to time because of economic conditions.
Short Term Rating of ‘A-1’ indicates high certainty of timely payment; liquidity factors are excellent and supported by good fundamental protection factors.
The previous rating action was announced on December 19, 2022.
LTML is wholly owned by Y.B. Holdings (Private) Limited, which is a leading conglomerate in Pakistan with having strong financial profile and diversified presence in various sectors including power generation, building materials, real estate, textile, chemicals, pharmaceuticals, food, entertainment and automotive sectors.
LTML is a vertically integrated textile company engaged in the spinning, weaving, processing, and stitching of various kinds of textile products.
Sales of the company can be classified into three categories: home textiles, garments, and fabric.
The ratings take comfort from a strong sponsor profile, diversified strategic investment portfolio, future dividend stream from Lucky One Project encompassing both a mall and residential towers, backward Integration with the introduction of a spinning segment, and investment in alternate energy resources.
Additionally, ratings also consider moderate growth in topline along with historic high margins, improved cash-flow coverage indicators, strong liquidity and capitalization profile.
The integrated nature of operations lowers the business risk profile of the company.
LTML achieved moderate growth in its topline attributed to PKR devaluation amidst a notable decline in volume. However, the size of the company remains notably lower as compared to peers.
Given ratings also incorporate the increase in margins, strategic addition of a spinning unit, and reduced reliance on imported cotton.
The strong profitability has translated into substantial growth in Funds from Operation (FFO) and improved cash-flow coverage metrics.
Although the Debt Service Coverage Ratio (DSCR) has dipped due to elevated finance costs and principal repayments, it continues to outperform industry peers.
The leverage ratios have depicted improvement and stand favorable as compared to peers owing to the strong growth in the equity base of the company while the debt quantum has reduced.
Going forward, maintenance of margins, cash flow, debt servicing coverage indicators, and leverage ratios remain important for ratings.
Copyright Mettis Link News
Posted on:2023-11-22T10:16:45+05:00
41644
