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Karachi: VIS Credit Rating Company Limited has reaffirmed the entity ratings of Gohar Textile Mills (Pvt.) Limited at ‘A+/A1’, indicating a stable outlook for the textile manufacturer despite ongoing economic challenges. The ratings reflect the company’s solid credit quality and its ability to meet short-term obligations, although they remain sensitive to broader economic fluctuations.
Gohar Textile Mills, established in 1995, operates under the regulatory oversight of the Securities and Exchange Commission of Pakistan. The company specializes in the production and export of home textiles, running an integrated manufacturing operation that includes spinning, weaving, fabric processing, and textile made-ups. Its main facilities are located in Faisalabad and Toba Tek Singh.
The reaffirmed ratings take into account the challenges facing Pakistan’s textile sector, including economic cyclicality, competition, demand volatility, and rising production costs. Regulatory changes, such as subsidy removals and energy price hikes, add further pressure. While global demand is recovering, inflation and competition from regional producers continue to affect profitability.
Despite these headwinds, Gohar Textile Mills has demonstrated consistent growth in revenue over the past four fiscal years. A strategic pivot to sourcing raw materials locally in FY23 helped counterbalance the effects of rupee depreciation. However, increased local market prices and service costs in FY24 put pressure on margins, reducing profitability despite higher sales volumes. This cost pressure continued into the first quarter of FY25.
The company’s financial profile is characterized by a reduction in debt and improved liquidity. Although cash generation weakened in FY24, it showed improvement in the first quarter of FY25. The company’s equity expanded, enhancing its gearing and leverage ratios, supported by higher retained earnings. Liquidity remains strong, with an average current ratio of 2.15 over four years, and a healthy Debt Service Coverage Ratio further supports the ratings.
Looking ahead, the sustainability of Gohar Textile Mills’ financial profile, particularly regarding cash flow coverage and capitalization, will be crucial for maintaining its ratings.