Analyst
Madiha Sohail
madiha.sohail@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
Related Research
PACRA maintains the entity ratings of DIC Pakistan Limited
Rating Type | Entity | |
Current (23-Nov-23 ) |
Previous (23-Nov-22 ) |
|
Action | Maintain | Initial |
Long Term | AA- | AA- |
Short Term | A1 | A1 |
Outlook | Stable | Stable |
Rating Watch | - | - |
DIC Pakistan Limited (“DIC” or ‘The Company’) ratings reflect the strong sponsor's profile, established market position, and adequate financial profile of the Company. The assigned rating takes into account the good governance framework, strong control environment, and qualified and experienced management team. DIC is predominately manufacturing different types of printing inks. As per management representation, the Company enjoys the good market share in the overall Printing ink industry. However, the major market is occupied by commercial importers. Production of the segment is directly linked with the demand of food products and consumer goods. During CY22, the utilization level was slightly on the higher side ~64% as compared to CY21 ~63%.
On the financial profile side, moderately leveraged capital structure i.e. CY22: ~42.4% (6MCY23: ~40.2%, CY21: ~35%) would remain imperative to the ratings where the short-term debt is related to working capital management. During CY22, the top line of the Company increased by ~40% to PKR 9,365mln as compared to CY21: PKR 6,716mln whereas at the end of 6MCY23, it stood at PKR 5,327mln. The major contribution is made by Rotogravure ink ~58% followed by Flexographic Ink-Solvent/UV-Based ~14%. As of CY22, the profit after tax of the Company stood at PKR 671mln (CY21: PKR 684mln) whereas at the end of Jun'23, PAT stood at PKR 552mln. The group synergy of DIC corporation and Packages Limited has helped the management in reaping the benefits of high demand and effective inventory management. Total borrowing of the company includes ~95.8% short-term borrowing. Furthermore, comfort for the assigned rating has also been drawn from Parent Company’s resolute commitment to supporting the Company in case of any financial needs. EBITDA improved by 32% to PKR 1,565mln as of CY22 (6MCY23: PKR 1,518mln) which provides a cushion for the finance cost and debt repayment. The Company has been managing its energy requirements by using a mix of solar energy and supply from WAPDA. Moreover, the sponsor's business acumen and vast experience in the industry bodes well for the rating.
The ratings are dependent upon the management’s ability to improve margins while sustaining its market share. Prudent management of the working capital, and maintaining sufficient cash flows and coverages are also imperative for the ratings. Any significant decrease in margins and coverages will impact the ratings.
About
the Entity
DIC Pakistan Limited was incorporated as a public limited company in July 1994 as a Joint Venture between DIC Asia Pacific Limited and Packages Limited by holding 45% and 55% shares respectively. Syeda Henna Babar Ali is the chairperson of the board and Mr. Ismail Hussain Naqvi is the CEO of the Company. Mr. Ismail joined DIC as Chief Operating Officer in June 2019 and took over as CEO from January 1, 2021. He has more than 25 years of diversified professional experience in various positions in different companies. A team of qualified individuals associates him.