Lahore, February 08, 2022 (PPI-OT):The assigned ratings of Ahmed Hassan Spinning Limited (AHSL) reflect adequate positioning of the Company in the relative universe. The Company specializes in manufacturing and export of yarn of average count of 21/1 CDD. The installed capacity is 28,152 spindles. Board comprises of four members; all the members are from sponsor family. The Company’s management involves experienced professionals looking after the operations of the Company. Sales mix compromises of local and as well as export with export destination in China and Korea. Management is eying additions in export destination, going forward.
Over the last few years, the Company’s topline is following a growing trend. During FY21, the Company’s revenues stood at PKR 3.8bln (FY20: PKR 3.7mln). Sales mix, dominated by local sales, displaying improving trend over the years. The Company’s enjoys established customer base in local market which drives the major revenue. Operating profits and net profitability recorded sizeable improvement in the recent year whilst margins remain good. After recent demerger from group company, the management is focusing on harnessing related costs in addition to enhancing capacity.
The financial risk matrix displays moderate leveraging and improvement in coverage compared to last year. Going forward, with planned capacity expansion, leverage is expected to increase. Hence, prudent management of affairs remains vital for the rating. Equity base, expected to improve going forward, after conversion of subordinated debt and increase in share capital. During the period July-December FY21-22, textile exports surged 26 percent YoY, fielding $9.39 billion in total export remittances, as compared to $7.44 billion in the same period last year.
This is attributable to increase in demand for textile products internationally and channeling of export orders towards Pakistani market. On a YoY basis, the exports of value-added textile items increased in both quantity and value in December 2021. Going forward, the textile sector’s outlook is expected to stay positive in the medium term where the demand for textile products is expected to sustain.
In the local market, the textile sector has recorded strong performance. Many players have also availed the TERF scheme announced by the Central Bank. This will lead to overall leverage of the sector to increase; however, on relaxed financing rates. The sustainability of demand pattern for the current higher orders from Europe and USA remains essential for the feasible utilization of added capacity by textile players.
The ratings are dependent upon the management’s ability to capitalize on growth opportunities in a competitive landscape, operate at optimal level and sustain margins, going forward. The governance framework and financial transparency need improvement. The company is expected to adhere to conservative financial discipline, which would be crucial to ratings.
For more information, contact:
Analyst,
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore, Pakistan
Tel: +92-42-5869504-6
Fax: +92-42-5830425
Email: hammad.rashid@pacra.com
Website: www.pacra.com