PACRA Maintains Entity Ratings of Master Tiles and Ceramic Industries Limited (30-08-2019)

Lahore, August 30, 2019 (PPI-OT): The ratings incorporate the company’s emergence as a growing entity, evident from consistent expansion in business volumes and ensuing profitability. Simplified ownership structure and induction of second generation in business provides comfort regarding succession. Family dominated governance framework, with no independent director or sub-committees exists. The company has established a strong position in its operating segment through competitive pricing and provision of better quality products to the end consumers.

Technological upgrade and installation of new production facilities alongside experienced management team transpire into operational efficiencies. Local demand for tiles has surged on the backdrop of anti-dumping duties levied on imports from China and increased duties / tariffs on imported tiles which bodes well for business prospects of the company. The management is capitalizing on this growth opportunity through expansion.

The company has completed third unit, adding to its existing capacity. Work on Unit 4 has already started and the entity is working on finalizing the financial structure and modalities of this mega expansion project. Current financial profile reflects a transitional stretch amidst expansion, hence prudent management of the associated risks are critical for the ratings. Modalities for the funding of the project are being finalized (with a mix of debt and equity), which will be evaluated in the backdrop of the entity’s credit profile.

The ratings are dependent on the company’s aptness to manage its liquidity profile while keeping up with its debt obligations. Prudent working capital strategy is an imperative driver to the ratings. Additionally, materialization of expansion venture into better cashflows and stronger margins would be of significance to the ratings. Meanwhile, margin deterioration, due to competition or excessive borrowings, leading to dilution of coverages will have negative impact on the ratings.

For more information, contact:
Analyst
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425
Email: hammad.rashid@pacra.com
Web: www.pacra.com