The Pakistan Credit Rating Agency Limited
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Sehar Fatima

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PACRA Maintains the Entity Rating of AL-Textile (Pvt.) Limited

Rating Type Entity
(02-May-22 )
(07-May-21 )
Action Maintain Maintain
Long Term BBB BBB
Short Term A2 A2
Outlook Stable Stable
Rating Watch - Yes

The assigned ratings incorporate AL Textile's good operating track record with a modest presence in the textile sector, depicted by its niche market operations and adequate margins. The Company's installed capacity hovers around 25,200 spindles. Presence of senior management team that possesses considerable experience in the textile is positive. The Company’s sales mix remain titled towards local market where topline clocked at PKR 4.3bln (FY20: PKR 2.8bln) primarily attributable to enhanced yarn prices. Recently, gross and operating profitability recorded notable improvement; trend should sustain. Same trend displayed in margins where improvement is witnessed. The financial risk is revealing high leveraging, improved gross coverage and improved working capital cycle. The ratings take comfort from the explicit commitment of sponsors to provide support to the Company. 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.
The ratings are dependent on Company’s ability to sustain its business profile while maintaining margins. Meanwhile, maintaining a moderately leveraged capital structure and adequate coverages is vital. Any significant deterioration in profits and/or coverages will have a negative impact on ratings.

About the Entity
AL Textile commenced its operations in 2003 as a private limited company. The Company has one spinning unit with 25,200 spindles. AL Textile is a family-owned business, with a majority stake owned by Mr. Omer Latif (~61%) and the remaining shareholding is distributed equally (~19% each) among his brother and sister. The Company’s board of directors comprises two members, with Mr. Omer Latif as Chairman of the board. He is also the CEO of the Company and is supported by a team of seasoned professionals.

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.