The Pakistan Credit Rating Agency Limited
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Iram Shahzadi

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PACRA Maintains Entity Ratings of US Apparel & Textiles (Pvt.) Limited

Rating Type Entity
(04-Mar-23 )
(04-Mar-22 )
Action Maintain Initial
Long Term A+ A+
Short Term A1 A1
Outlook Stable Stable
Rating Watch - -

US Apparel & Textiles (Private) Limited (US Apparel) is a prominent textile venture of US Group. The group companies operate under the umbrella of AJ holdings – the flagship HoldCo of the group. The group leveraging is nil, which is much of a conscious group decision. Sponsors exercise oversight of the businesses and professional management, are well-equipped and well-experienced, and spearhead the individual companies. Strategic direction is meticulously worked out and rigorously followed once decided and finalized. The Company is principally engaged in the manufacturing and export of ready-made garments. The Company’s management has experienced professionals, aided by comprehensive reporting, where operations of the Company are supervised with complete autonomy. Its established business profile emanates from a strong presence in the broader value chain; enabling the company to manage volatility in the textile industry. The rating reflects a steady revenue base in recent years. The top line primarily consists of exports. The company’s top line improved to PKR 44.7bln (FY21: PKR 30.7bln). Margins remained largely sustained where growth was recorded in revenue. US Apparel continues to maintain a favorable capital structure and strong coverages signifying a robust financial profile. During the year Company enhanced its capacity by 15,000 Pcs per day. This will cater to expansion in the revenue base and strengthen the business profile of the company. This will cater to expansion in the revenue base and strengthen the business profile of the company. During 7MFY23, the textile exports were valued at $10.08bln compared to $10.93bln, reflecting an 8% decline YoY – the declining trend has been recorded in the last few months. The decline in exports is driven by attrition in the demand pattern of export avenues. The hike in cotton prices and low demand for yarn in international markets is also a challenge. The analysis of 5MFY23 reveals that among value-added items, bedwear has witnessed the largest decline of 19% (on an MoM basis), down to $217 million. Knitwear remained on the downward path in October 2022 and declined by 10% to $392 million. Among non-value-added items, the cotton yarn has shown the largest decline of 35%. Moreover, a slowdown is prevailing in textile demand amid burgeoning inflationary pressures in the exporting destinations, especially in the US and European countries. The demand pattern is expected to improve post-Jun-23.
The ratings are dependent on the Company’s ability to maintain a strong business profile amidst current circumstances. Preserving low-leveraged capital structure and sound coverages remain imperative.

About the Entity
US Apparel & Textiles (Private) Limited was incorporated on February 18, 1987, as a private limited company. The Company is principally engaged in the manufacturing and export of ready-made garments. The Company has five production units. The Company belongs to a prominent business venture of US Group. US Apparel holds 100% shareholding of AJ Holding (Private) Limited. A Group holding company, AJ Holding Limited, also exists for managing investments in subsidiaries and associated companies and this bodes well for stability. EY Ford Rhodes Chartered Accountants is the external auditor of the Company. The auditor has expressed an unqualified opinion on the financial statements ending Jun 30, 2022. Mr. Muhammad Salman Hafeez Malik is the CEO designate of the Company. He carries twenty-five years of professional experience and is a Chartered Accountant. He has been working with this group since 2019. Mr. Afnan Mansoor, CFO of the Company, has been associated since the year 2009. He is a Chartered Accountant.

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.