The Pakistan Credit Rating Agency Limited
Press Release


Sehar Fatima

Applicable Criteria

Related Research

This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Upgrades Entity Ratings of Shahzad Textile Mills Limited

Rating Type Entity
(13-Apr-22 )
(30-Apr-21 )
Action Upgrade Maintain
Long Term A- BBB+
Short Term A2 A2
Outlook Stable Stable
Rating Watch - Yes

Shahzad Textile Mills Limited is a public listed company which is engaged in manufacturing of yarn and socks. The specifications include ring spun yarn, synthetic blended yarns and wide range of socks. The Company is sister concern of Sargodha Jute Mills and has history of four long decades. The Company’s management involves experienced professionals looking after operations of the Company. Over the last few years, the business profile has strengthened manifold. The Company has successfully achieved diversification in value added segment of socks. Also, recent rationalization of yarn capacity has enhanced revenue. Revenue base and margins of the company improved attributable to yarn export and expansion of socks unit. During FY21, the Company’s revenues displayed notable improvement to PKR 6.9bln (FY20: PKR 4.3bln). Along with revenue base, operating and net profitability recorded sizable upsurge. The Company has developed customer base at export avenues of North America, Europe and Africa. Further, penetration in Export markets is planned. The financial matrix reveals moderate leveraging, strengthened coverage and efficient working capital cycle. During the period July-December FY21-22, textile exports of the country 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. The relief measures introduced by the State Bank of Pakistan such as deferment of loan payments for one year, low-interest rates, and salary refinance scheme also provided comfort to the sector. 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.

About the Entity
Shahzad Textile Mills commenced its operations in 1981 as a public limited company. Mr. Imran Aslam (CEO) along with other family members collectively own majority (~73%) shares of the Company. The remaining shareholding of the Company is held by Corporates (~6%) and institutions (~21%). Shahzad Textile is in the business of manufacturing ring spun cotton and synthetic blended yarns, with a total installed capacity of ~63,648 spindles and 180 knitting machines. Moreover, due to the recent expansion into socks manufacturing, the Company is now involved in the export of a variety of socks along with its yarn.

The board of the Company consists of seven members, out of which two are executive, four non-executive and one independent director. Mr. Imran Aslam is looking after the Company’s operations from more than two decades as CEO and is supported by an experienced management team.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.