PACRA maintains entity ratings of Ghani Global Glass, assigns positive outlook

November 24, 2023 (MLN): Pakistan Credit Rating Agency Limited (PACRA) has maintained entity ratings of Ghani Global Glass Limited (PSX: GGGL) at "BBB+" for long term and "A1" for short term with a positive outlook forecast, latest press release issued by PACRA showed.

GGGL is Pakistan’s first concern to mass-produce pharmaceutical-neutral tubing glass.

The company has invested in state-of-the-art European technology furnaces and equipment to provide the finest product and create value through import substitution.

According to the management, the current national market of glass tubes stands at 7,733 tons per annum, approximately 49% of the demand is being met through imports (30% Germany and 19% China), and the rest of 51% is contributed by GGGL.

The company is aiming to increase its market share in the Chinese as well as European tubes segment.

New furnace with three production lines the annual production capacity of the company is 18.5TPD.

Apart from the new three-line furnace, the management of the Company has decided to do the BMR of the existing old furnace to enhance the capacity of Neutral Borosilicate Glass Tube USP Type I.

With the help of this Furnace, the company will be in a position to enhance its exports in South African countries and other Latin American and Eastern European countries.

Furthermore, the installation of six Modern Mechanique Italian ampoules during the year contributes to the company’s expansion efforts.

During FY23, the company’s topline clocked in at Rs2.071 billion (FY22:  Rss1.51bn) reflecting a growth of 38% primarily due to an increase in prices while volumes remained stagnant.

However, the notable rise in interest rates led to a significant increase in finance costs, resulting in the company’s net profit being constrained to Rs102 million (FY22: Rs198m).

The company has also a presence in the value-added segment of Glass Tubes and converts them into Ampules, and Vials.

The company was able to capture a reasonable (6%) market share in this segment.

The current actual ampule converter capacity was 30m per annum.

However, GGGL faces competition in this particular tube conversion segment from organized and unorganized players.

The operations of the company are benefited from a sound system of internal controls implemented across the organization.

GGGL has availed TERF facility for its production capacity expansion.

Going forward the company is expected to receive benefits from (a) rising demand for locally manufactured Glass Tubes (b) imposition of regulatory duties on Imports of Glass Tubes (c) export potential of the product (d) rationalized leverage policy.

The financial profile of the company is considered strong with comfortable coverages, cashflows, and working capital cycle. Capital structure is leveraged comprising a mix of short-term and long-term (TERF) for capacity expansion projects.

The ratings are dependent on upheld sustainable profits and market share while retaining sufficient cash flows and coverages.

However, adherence to maintaining its debt metrics at an adequate level is a prerequisite.

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