Karachi, March 15, 2023 (PPI-OT): VIS Credit Rating Company Limited (VIS) has assigned initial entity ratings of ‘A-/A-2’ (Single A Minus/A-Two) to Magna Processing Industries (Pvt.) Limited (MPIL). The medium to long-term rating of ‘A-’ denotes good credit quality; protection factors are adequate. Risk factors may vary with possible changes in the economy.
The short-term rating of ‘A-2’ denotes good certainty of timely payments. Liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small. Outlook on the assigned ratings is ‘Stable’. MPIL is an export-oriented textile unit and primarily operates through three business segments, weaving, processing and home textile madeups. Shareholding of the company is vested with family members who have extensive experience in the textile industry.
The weaving unit of the company comprised auto/rapier looms and waterjet looms while the company has expanded its weaving operations during the last two years. The ratings also derive comfort from the fact that the expansion was majorly financed through own sources.
Export sales of the company constituted home textile madeups and processed fabric while local sales emanate from fabric processing and conversion income. During FY22, the slower revenue growth vis-à-vis preceding year was majorly due to stagnant volumetric export sales caused by slowdown in global markets, particularly in Europe and United States.
Meanwhile, average selling prices increased considerably due to competitive advantage to textile exporters in terms of pricing amidst weakening local currency. The company’s financial risk profile is underpinned by healthy margins, adequate liquidity position in terms of cash flow coverages and working capital management, and maintenance of moderately leveraged capital structure on a timeline basis.
The ratings incorporate stable revenue growth posted by the company in 1HFY23 and projects to continue this trend in full year as well. However, given the current weak macroeconomic environment, the uncertainty of textile industry growth amidst the global slowdown further adds to the overall business risk profile.
In addition, all time high inflation suppressing purchasing power of the masses, higher mark-up rates, unstable forex parity and depleting foreign exchange reserves will remain major challenges. The ratings will remain dependent on realization of projected sales and profitability while maintaining liquidity and capitalization profiles at comfortable levels.
For more information, contact:
Director Compliance and Rating Analytics,
VIS Credit Rating Company Limited
VIS House, 128/C, 25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi, Pakistan
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