VIS reaffirms entity ratings of Lucky Textiles

December 29, 2021 (MLN): VIS Credit Rating Company Limited has reaffirmed entity ratings of Lucky Textile Mills Limited (LTML) at ‘AA-/A-1’ (Double-A Minus/A-One), said a press release issued by VIS on Tuesday.

Long Term Rating of ‘AA-’ denotes high credit quality; protection factors are strong. Risk is modest but may vary slightly from time to time because of economic conditions. Short Term Rating of ‘A-1’ signifies high certainty of timely payment; liquidity factors are excellent and supported by good fundamental protection factors. Outlook on the assigned ratings is ‘Stable’. Previous rating action announced on November 10, 2020, the statement added.

Assigned ratings take into account a strong sponsor profile as the company is a wholly-owned subsidiary of Y.B. Holdings (Private) Limited, which is a leading conglomerate in Pakistan having a strong financial profile and diversified presence in sectors including power generation, building materials, real estate, textile, chemicals, pharmaceuticals, food, entertainment, and automotive sectors.

Ratings encapsulate a strong financial risk profile and a diversified investment portfolio that continues to support the net profitability of the company. Positive momentum in exports of a value-added segment on account of recovery in international markets, the gradual establishment of international customer base amid COVID-19 recovery phase, and export-oriented policies of the government also supports the business risk profile of the company, it noted.

Lucky Textile Mills Limited is undertaking business integration and capacity addition which is expected to improve operational efficiency and in turn margins, going forward.

Assessment of financial profile incorporates volume-driven export revenue growth in FY21. Gross margins depicted a slight decline owing to an increase in yarn prices, however, net margins and profitability exhibited an increase on account of a sizeable increase in the share of profits from associates. Cash flow coverages including debt servicing continued to remain strong. The liquidity profile also remains sound.

Furthermore, capitalization indicators remained low due to an increase in equity base. Gearing and leverage levels are expected to depict an increase in financing CAPEX going forward, albeit remaining within comfortable levels on account of projected profitability.

Going forward, sustained profitability and maintenance of gearing and leverage ratios at current levels will be important for the assigned level of ratings, it said.

Copyright Mettis Link News