Hadeed Pakistan Secures Initial Ratings Amid Market Expansion

Lahore: Hadeed Pakistan (Pvt.) Limited has secured initial entity ratings from The Pakistan Credit Rating Agency Limited, marking a significant milestone for the family-operated business in the flat steel manufacturing industry. As a new entrant in the cold rolling (CRC) segment, Hadeed has established itself as the sole player in Punjab, leveraging a unique regional advantage. The company’s market presence has grown substantially, with its CRC product share increasing from 7% in FY20 to 27% in FY24.

The ratings reflect Hadeed’s resilience in overcoming early challenges, such as the COVID-19 pandemic and import restrictions. Despite the moderate to high business risk associated with reliance on imported raw materials and a declining CRC demand due to a weak macroeconomic environment, Hadeed has maintained a strong business understanding. The CRC industry has seen demand drop by nearly 40% from a peak of 500,000 metric tons in FY21, with projections indicating stability through FY25.

Hadeed anticipates selling approximately 100,000 tons by the end of FY25. Imports, chiefly from China, account for 20% of demand, although local manufacturers are protected by duties. The company utilizes a hybrid sales model, with the majority of sales occurring through its dealer network. However, the concentration of the customer base among a few key players increases concentration risk.

Financially, Hadeed reported a turnover of PKR 19 billion in FY24 and PKR 14 billion in 9MFY25, demonstrating steady growth. Profit margins are under pressure due to declining raw material prices, leading to inventory losses. Gross margins fell to 8.8% in 9MFY25 from 11.8% in FY24, and net margins declined to 3% from 4% in FY24.

To enhance efficiency, Hadeed plans to install solar power generation to reduce reliance on the national grid. The company’s financial risk stems from short-term borrowings needed to support working capital. Hadeed maintains a moderate leverage position, with a gearing ratio of 36%. The company’s equity base stands at PKR 4.4 billion, with approximately PKR 2 billion in accumulated profits.

The ratings will remain sensitive to macroeconomic improvements that could support demand recovery. Hadeed’s plans to diversify its product slate through a galvanized plant and explore export opportunities are viewed positively, enhancing its strategic position in the industry.