The Pakistan Credit Rating Agency Limited
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Sehar Fatima

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PACRA Upgrades Entity Ratings of Gul Ahmed Textile Mills Limited

Rating Type Entity
(07-Mar-22 )
(07-Sep-21 )
Action Upgrade Maintain
Long Term A+ A
Short Term A1 A1
Outlook Stable Positive
Rating Watch - -

The assigned ratings incorporate Gul Ahmed Textile Mills Limited’s (Gul Ahmed) sound operating track record with a strong presence in the broader textile value-chain; assists the Company in steadfast management of any volatility that may arise in textile business. The presence of seasoned senior management team that possesses considerable experience in the textile sector is also a comfort. Presence in retail segment - through wholly owned subsidiary - "Ideas" in local market adds up to a stronger business risk profile. Presence in domestic retail space will be further augmented on standalone basis. The entity has achieved a sizable revenue base, while focus on value-added products bring higher gross margins. The Company maintains a balanced sales mix, tilted toward exports (2QFY22: 68%, 2QFY21: 66%). This emanates from export market orientation, targeting an established niche of quality-conscious institutional buyers. Exponential growth is being eyed in revenue from export base which will secure significant size in rupee terms. Recently, the revenues of all segments witnessed an increase due to enhanced opportunities for Pakistan for textile products locally and around the world. During FY21, the revenue base reflected robust rise to PKR 86bln (FY20: PKR 54bln). Net profitability reflected same momentum (FY21: PKR 5.1bln). Trend continued in 1HFY22 where topline clocked at PKR 46.9bln and net profitability stood at PKR 3.3bln. The Company has significantly improved its profitability with remarkable growth in margins both locally and in export markets. The Company’s regular BMR, since many years, has resulted in turnaround in profitability and revenues. The liquidity profile is considered good with manageable working capital cycle and sufficient cash flows to meet outstanding obligations while leveraging remains on the higher side. Improved trade leverage and increased coverage is also positive. The management has expressed intention to redeploy the bulk of profitability generated through the business for future expansion. 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.
The ratings are dependent on the Company's ability to sustain its business profile while maintaining its margins and strong. At the same time, prudent management of working capital needs and meeting financial obligations remain critical. Sponsor’s commitment to provide support gives comfort to the ratings.

About the Entity
Gul Ahmed Textile Mills Limited is listed on Pakistan Stock Exchange, commenced operations in 1953. The Company is engaged in the manufacturing of yarn, fabric, garments, and home textile products. Management control lies with the Bashir family, holding the majority stake in Gul Ahmed - Gul Ahmed Group through two corporates: Gul Ahmed Holdings (Pvt.) Limited (~67%) and Swisstex Chemicals (Pvt.) Limited (~3%). The Company has seven-member Board of Directors comprising four members of the Bashir family, one non-executive, and two independent directors. The Chairman, Mr. Mohammed Bashir, has over 4 decades of experience in the textile sector. He is a founding member of Gul Ahmed Energy and Habib Metropolitan Bank Limited. The CEO, Mr. Zaki Bashir, oversees the Company affairs with the help of an able 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.