The Pakistan Credit Rating Agency Limited
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Anam Waqas Ghayour

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PACRA Maintains Entity Ratings of Jamal Pipe Industries (Pvt.) Limited

Rating Type Entity
(03-Jul-23 )
(15-Jul-22 )
Action Maintain Maintain
Long Term BBB BBB
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

Jamal Pipes Industries (Pvt.) Limited (“The Company or JPI”), a family operated business, is engaged in manufacturing of pipes and allied products for four decades. The Company's product slate includes black line pipes, galvanized line pipes, variety of poles (octaconical poles, tubular poles and street light poles and guardrails. Around 47% is contribution from poles while remaining 53% arises from pipes and guardrails. Diversification in product slate is considered positive while further strengthening of revenue from each product would reduce concentration and add cushion to business risk profile. The business and financial risk of the steel sector has increased due to import restrictions, limited raw material coverage, soaring raw material prices, exchange rate volatility, and higher interest rates. The ongoing situation is expected to persist, however companies, keeping track of leveraging, finding alternative raw material and able to diversify their portfolio are able to sustain the current pressures. The Company in line with the industry trend faced a volumetric decline though, order book remain in comfortable position, as it enjoys a long association from big corporate clients. During the period 9MFY23, JPI sales revenue clocked to PKR ~1,880mln (FY22: PKR ~3,097mln). The gross profit and net profit for the period 9MFY23 stood at 7.9% – PKR ~149mln & 1.2% – PKR ~22mln (FY22: 8.5% – PKR ~263mln & 2.3% – PKR ~71mln) respectively. The decline in revenue and margins was due to the increase in Hot Rolled Coil (HRC) prices – the basic raw material, along with inability to establish LCs, increased energy prices, policy rates and slowdown in economic growth. However owing to better retention prices JPI manages to clamp it margins. JPI manages its working capital through the mix of internal cash generation and short term borrowings. As of 9MFY23 leveraging stood at 15.1% (FY22: 18.3%: FY21: 43.9%) constituting 100% short term borrowings - inherent need of the business model. Sufficient cushion in working capital lines are available. In order to cater the macro economic challenges JPI prefers to source expensive raw material from local suppliers on extended credit terms and relies less on imports. The ratings reflect an adequate market presence of JPI in a highly fragmented industry. The Company has an explicit policy of not raising any long-term debt, therefore, the debt book only contains of short-term borrowings.
The ratings are dependent upon the Company’s ability to sustain and improve its business profile in the wake of challenges in current diluted economic scenario. Herein, effective and prudent management of financial risk indicators & improvement of business margins through operational efficiencies remain important.

About the Entity
Jamal Pipes Industries (Pvt.) Limited was incorporated in 1981. The Company is wholly owned by the sponsors family with equal shareholding held by Mian brothers – Mr. Mian Farooq Ahmed and Mr. Mian Shakeel Ahmed. The overall control of Company vests with two members' board of directors. Mr. Farooq Ahmed - the Chief Executive and Mr. Shakeel Ahmed - Executive Director are equipped with necessary technical skills to manage and oversee the business. Mr. Zubair Ahmed – (CA finalist) is the CFO of the Company and hold long association with the Company.

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.