VIS reaffirms entity ratings of Bunnys Limited

April 07, 2023 (MLN): VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Bunnys Limited (PSX: BNL) at ‘A-/A-2’ (Single A Minus/A-Two), the rating agency said in a press release.

The medium to long-term rating of ‘A-’ denotes good credit quality coupled with adequate protection factors. Moreover, risk factors may vary with possible changes in the economy.

The short-term rating of ‘A-2’ denotes good certainty of timely payment coupled with sound company fundamentals and liquidity factors.

The previous rating action was announced on February 01, 2022. The ratings assigned to BL take into account the company’s moderate business risk profile owing to its presence in fast moving consumer goods market and largely established brand name.

BNL is selling daily-use bakery products in Lahore and central Punjab and reportedly has over 40% market share. The overall sales to the corporate sector are around 20%. BL is currently manufacturing more than 125 different products related to the bakery and snacks division.

To cater to the increasing demand, BNL has installed a new bun/burger line.

The management plans to introduce a couple of new products during the current year. The automation process has reduced waste, thereby improving operational efficiencies.

The ratings incorporate growth in topline on the back of volumetric increase and higher prices. The gross margins decreased during FY22 mainly due to an increase in fuel & power and higher raw material-related costs.

Nevertheless, gross margins increased in HY23 mainly on account of improving operational efficiency. However, net margins decreased mainly due to an increase in financial charges.

The ratings derive comfort from projected growth in revenues driven by increasing demand and higher capacities. Meanwhile, leverage and coverage remained adequate.

The ratings will remain dependent on managing the net margins in the wake of increasing operating and financial costs, improving liquidity ratios, and maintaining capitalization indicators at comfortable levels.

Copyright Mettis Link News