VIS reaffirms entity ratings of Fast Cables Ltd

December 05, 2023 (MLN): The VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Fast Cables Limited (PSX: FCL) at ‘A-’ for long-term and ‘A-2’ for short term with a stable future outlook, latest press release issued by VIS showed.

A medium to long-term rating of 'A-' indicates good credit quality; protection factors are adequate.

While a short-term rating of 'A-2' indicates good certainty of timely payment

The previous rating action was announced on November 16, 2022.

Fast Cables Limited, a public limited company incorporated in 2008, specializes in manufacturing and selling electric wires, cables, and conductors.

With its registered office in Lahore, FCL operates two manufacturing units in the city and maintains branch offices across major cities in Pakistan.

The company is considered one of the three major players in the electric and cable goods industry.

Assigned ratings incorporate the industry’s medium business risk profile. The industry's oligopolistic nature, with major firms collectively holding 60% of the market share, mitigates some cyclicality and competitive intensity.

However, vulnerabilities arise from global market fluctuations in imported raw materials, such as copper.

Nonetheless, despite challenges faced by the cable and electrical goods industry in FY23, including economic uncertainties, inflation, and high-interest rates, FCL's financial performance remained stable.

Ratings also consider FCL's top line and margin growth, supported by sales to government institutions.

The company's initiatives, including entering export markets and launching 'Fast Lights,' contributed to growth in the topline in FY23.

Improvements in gross profit margin and net margin increase provide support to ratings. Ratings also account for the improvement in the capitalization profile.

However, it was noted that while the gearing ratio saw a significant recovery, leverage remained constrained by a notable payable buildup.

Similarly, while the liquidity profile remained stable, the buildup in payables posed a concern for FCL's liquidity profile.

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