VIS reaffirms entity rating of Master Textile Mills Ltd

June 23, 2025 (MLN): VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Master Textile Mills Limited (MTML) to 'A+/A1' (‘A Plus/A One’).

Medium to long term rating of 'A+' indicates good credit quality; Protection factors are adequate.

Risk factors may vary with possible changes in the economy.

Short term rating of 'A1' indicates strong likelihood of timely repayment of short-term obligations with excellent liquidity factors.

Outlook on the assigned ratings remained ‘Stable’.

Previous Rating action was announced on April 04, 2024.

MTML, incorporated in 1992, is a vertically integrated textile manufacturer engaged in the production and sale of yarn, greige fabric, dyed and finished fabrics, denim, and ready-made garments.

The company’s operations span the complete textile value chain, with in-house facilities for spinning, weaving, dyeing, finishing, and garment stitching.

Its head office and manufacturing facility are located in Manga Mandi, Lahore, Pakistan.

MTML operates under the umbrella of Master Group of Industries, a diversified conglomerate with interests across multiple sectors including foam and spring mattresses, engineering, automobiles, chemicals, and energy.

Pakistan’s textile sector faced challenges driven by economic cyclicality, intense competition, and structural constraints.

Industry remains sensitive to demand fluctuations, exposing it to broader economic pressures.

In 3QFY25, the sector demonstrated growth, primarily fueled by the value-added segment, despite challenges in domestic cotton production necessitating reliance on imported cotton.

Exporter profitability remains vulnerable to cotton market volatility, inflationary pressures, and exchange rate fluctuations, while persistently high energy costs continue to strain overall cost structures.

Furthermore, rising input costs and regulatory changes are creating a challenging environment for the sector.

The assigned ratings reflect Master Textile Mills Limited’s consistent revenue growth, underpinned by stable financial performance.

The Company maintains a presence in both domestic and international markets, with a diversified product portfolio primarily comprising garments and dyed fabrics.

Despite growth in revenue, profitability indicators were under some pressure in 1HFY25 by elevated raw material costs, higher energy tariffs, and increased export-related expenses.

These factors contributed to a contraction in both gross and net margins during the review period. Management anticipates an improvement in profitability, driven by cost-cutting initiatives focused on optimizing raw material sourcing and energy consumption.

The ratings also take into account the Company’s overall financial risk profile.

Borrowings remained at manageable levels, keeping a manageable gearing ratio.

Liquidity and debt servicing capacity remained adequate, though FFO coverage ratios declined in line with profitability.

The ratings will remain sensitive to sustained improvement in profitability indicators.

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