VIS reaffirms entity ratings of Suraj Cotton Mills Ltd

May 07, 2025 (MLN): VIS Credit Rating Company Limited (VIS) reaffirms entity ratings of Suraj Cotton Mills Limited (PSX: SURC) at ‘A+/A1’ (Single A Plus/A One).

Medium to long term rating of ‘A+’ indicates good credit quality; Protection factors are adequate.

Risk factors may vary with possible changes in the economy.

Short term rating of 'A1' indicates strong likelihood of timely repayment of short-term obligations with excellent short-term liquidity factors.

Outlook on the assigned rating is ‘Stable’. Previous rating action was announced on February 09, 2024.

SURC, a publicly listed company, was established in 1984 and began commercial operations in 1985.

The principal business of the Company is manufacturing and sale of yarn, cloth, as well as processing of fabric.

The Company's registered office is in Lahore, with production facilities located at Nooriabad (Sindh), Raiwind and Shahkot (Punjab).

The business risk profile of Pakistan’s textile sector remains a key consideration for SURC’s assigned ratings, given its exposure to economic cyclicality and intense competition.

Challenges in the domestic textile sector, mainly input costs and intense regional competition, contributed to elevated business risk.

However, rebound in demand orders led to a marked improvement in net sales in FY24, stabilizing in the ongoing period.

Concurrently, enhanced profitability resulted in improved cash flows, enhancing debt service coverages.

Moreover, capitalization ratios also improved in the review period.

The current ratio stands at comfortable level while the Company’s portfolio of liquid assets provides additional comfort.

The assigned ratings take into account recovery in financial performance of the Company over the review period.

However, maintaining positive momentum in volumetric offtake, stability in profit margins and augmenting debt coverages will be important factors from the ratings perspective, going forward.

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