March 6, 2019 (MLN): Pakistan Credit Rating Agency has maintained entity ratings of Gul Ahmed Textile Mills Limited at ‘A’ for long-term and ‘A1’ for short term, with a stable outlook forecast.
The ratings reflect Gul Ahmed’s established business profile with strong presence in the broader textile value-chain; enabling the company to manage volatility in textile business. Presence in retail with renowned brand “Ideas” in local market adds up to stronger business risk.
The entity has achieved a sizable revenue base, while focus on value added products brings higher gross margins. This emanates from export market orientation, targeting established niche of quality-conscious institutional buyers. Nevertheless, this has led to customer concentration; longevity of relationship with big-name clients in addition to sustained quality would help manage the risk.
Recent rupee devaluation has boded well for the company’s export-oriented topline while recent BMR has improved efficiency, depicted in improved gross margins. Meanwhile, net margins remain under pressure on the back of hefty branding activities and cut throat competition in the local market.
The ratings are dependent on the company's ability to sustain its business profile while maintaining strong margins and coverages. At the same time, prudent management of working capital needs and meeting financial obligations remain critical.
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