December 7, 2020: VIS Credit Rating Company Limited (VIS) has reaffirmed entity ratings of Yunus Textile Mills Limited at ‘AA-/A-1+’ (Double A Minus/A-One Plus).
Long Term Rating of ‘AA-’ denotes high credit quality and strong protection factors. Risk is modest but may vary from time to time because of economic conditions.
Short Term Rating of ‘A-1+’ signifies high certainty of timely payment; Short term liquidity, including internal operating factors and/or access to alternative sources of funds, is outstanding and safety is just below risk-free Government of Pakistan’s short-term obligations. Outlook on the assigned ratings is ‘Stable’.
The assigned ratings reflect Company’s leading market position, vertically integrated operations, diversified balance sheet, favorable business risk dynamics and strong financial risk profile. Ratings also reflect strong sponsor profile, with YTML being a wholly owned subsidiary of YB Holdings (Pvt.) Limited. Yunus Brother’s Group has robust financial profile with diversified presence in sectors including power generation, building materials, real estate, textile, chemicals, pharmaceuticals, food and automotive sectors.
YTML is amongst the leading home textile exporters in the country. The company enjoys strong franchise and is recognized as a quality product manufacturer with product line ranging from bed sheets, comforters, duvets, quilts, and pillow-cases to curtains and table linens. Major export markets include USA, UK, France, and Sweden. Clients include a mix of fashion brands and top-tier retailers who have had a lengthy relationship with YTML.
The assigned ratings incorporate favorable industry dynamics as evident from supportive government policies and expected gradual shifting of orders from other key regional countries. Resultantly, management has embarked on capacity and efficiency enhancement across the value chain. A sizeable portion of the capex is expected in enhancing end-product capacities.
YTML’s performance in FY20 was characterized by consistent growth in topline with sustained profitability margins. Given the uptick in debt, cash flow coverage ratios like FFO-Long Term Debt and DSCR have been impacted, albeit these remain within the threshold for the assigned rating band. The company’s capital base grew by 35% in FY20, partly on account of internal capital generation and unrealized gain on investments. Given robust profitability and conservative dividend payout strategy, YTML’s low leverage indicators have been maintained. The assigned ratings remain dependent on maintaining low leveraged capital structure and margins, in line with the business risk profile assessment of YTML.
VIS
38440
