The Pakistan Credit Rating Agency Limited
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Shayan Farooq

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PACRA Maintains Entity Ratings of Sadiq Poultry (Pvt.) Limited

Rating Type Entity
(29-Apr-22 )
(10-Mar-22 )
Action Maintain Maintain
Long Term BBB+ BBB+
Short Term A2 A2
Outlook Stable Stable
Rating Watch - Yes

The poultry industry is one of the largest agro-based segments in Pakistan, comprising domestic & commercial poultry. The industry has posted annual growth of ~ 10%-12% lately. Pakistan is sufficient in poultry meat and egg production. However, per capita protein consumption remains low (11th) when compared to the world's average. The industry generates an estimated annual revenue of ~ PKR 1,092bln from local and export sales during FY21. The industry has witnessed recovery after the dip in prices and demand amidst the pandemic. Subsequently, prices of poultry products, especially day-old chicks, witnessed a hike and benefited the players involved in the poultry allied chain. Increasing demand, and hence, prices eased down the liquidity problems of the industry. As business avenues became operational, demand for poultry products is likely to stay favorable for the industry players.
The ratings reflect Sadiq Poultry (Pvt.) Ltd.'s ('Sadiq Poultry" or "the Company') association with an established and vertically integrated poultry Group, Sadiq Group. The Company has an established profile in poultry industry and is a leader in broiler chicken, eggs, and day-old chicks segment. Post Dr. Sadiq's demise, division of breeder and layer farms and subsequent ownership was in transition. Lately, the split has been streamlined. Previously, the Company held 38 poultry farms (30 - breeder farms, 4 broiler farms, and 4 layer farms) and 2 hatcheries. Post transition, Sadiq Poultry owns ~ 34 farms and 2 hatcheries. These farms and hatcheries have a placement capacity of ~1mln birds ~ 2.3mln eggs. Remaining farms (~ 4) have been transferred to Sadiq Feeds, a group company. The Company's revenue stream is concentrated towards day-old chicks and eggs. Rise in prices of day-old chicks and bulk procurement of feed from Group companies supplemented the margins. Financial risk profile is characterized by strong coverages, moderate leveraging and elongated working capital cycle. Loan mix is skewed towards short term borrowings, availed to fund the working capital requirements.
The ratings are dependent on the Sponsor's ability to prudently manage business risk for perishable consumer products, while sustaining business margins. Going forward, continued harmonization between Sponsors and consistent generation of sustainable operational cashflows is important.

About the Entity
Sadiq Poultry (Pvt.) Limited is a successful parent venture of Sadiq Group, a well-known player of Pakistan’s poultry industry. It was incorporated in 2004 and is primarily engaged in operating 38 poultry farms, out of which 30 are breeder farms, 4 broiler units, 4 laying units and 2 hatcheries. The Company has its own livestock pharmaceutical setup, to ensure birds health.
After Dr. Sadiq's demise, the shareholding was divided between his two wives and six children: Salman Sadiq (42%), Asif Zubair (25%), Sanan Sadiq (9%), Saad Sadiq (9%), Saima Elahi (4%), Ayesha Bilal (4%), Rasheeda Begum (3%) and Saadia Sadiq (3%). The Company is headed by Mr. Asif Zubair, the eldest son of Dr. Sadiq, as the CEO.

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.