Karachi, In a recent evaluation, VIS Credit Rating Company Limited has reaffirmed the entity ratings of Agha Steel Industries Limited (ASIL) as 'A/A-2', reflecting a stable outlook. This assessment signifies ASIL's robust credit quality and assures investors of the company's sound financial standing and liquidity.
According to VIS Credit Rating Company Limited, the medium to long term rating of 'A' for ASIL demonstrates the company's good credit quality and adequate protection factors, though these may be subject to change with economic fluctuations. The short-term rating of 'A-2' assures good certainty of timely payment, backed by strong liquidity factors and solid company fundamentals. This rating adjustment marks an improvement from the previous 'Negative' outlook to a current 'Stable' one, a change initiated since the last rating action on December 13, 2022.
Established in Pakistan as a private limited company on November 19, 2013, ASIL transitioned to a public limited company in April 2015 and was subsequently listed on the Pakistan Stock Exchange following an IPO in November 2020. The company, with its registered office and manufacturing facilities located at Port Qasim Authority in Karachi specializes in producing and selling steel bars, wire rods, and billets.
The ratings assigned to ASIL take into account the high business risk profile within the long steel industry, characterized by its cyclicality and competitive nature. Despite these challenges, ASIL's technological edge has provided a buffer to these ratings. The financial risk profile of ASIL, as considered in the ratings, acknowledges the market contraction faced in FY23 due to macroeconomic constraints. This led to decreased demand and lower capacity utilization. However, ASIL managed to sustain healthy gross margins through operational efficiencies and technological advancements, including the Electric Arc Furnace (EAF) and Mi. Da. Rolling project. The company's capitalization profile is deemed adequate, although slight pressure is anticipated from the forthcoming issuance of a green bond. Liquidity and coverage profiles, which saw a decline in FY23, have since recovered to satisfactory levels by 1QFY24.
Future ratings will depend on the management's effectiveness in executing projected plans and improving key financial metrics such as capitalization, coverage, and liquidity in line with the assigned ratings.
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