The Pakistan Credit Rating Agency Limited
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Muhammad Noor Ul Haq

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PACRA Assigns Initial Entity Ratings to Pearl Petro Industry (Pvt.) Limited | Positive Outlook

Rating Type Entity
(12-Jun-23 )
Action Initial
Long Term BBB-
Short Term A2
Outlook Positive
Rating Watch -

Pearl Petro Industry (Pvt.) Limited is major producer and seller of Polypropylene bags, Polyethylene Bags (liner bags), farm house PT sheets and other plastic sheets. Further, The Company has also set up a flexible packaging line where they print and provide packaging products to large-scale corporate clientele. The assigned ratings factor in the established and long track record of operations of the Company with extensive experience of sponsors in the plastic packaging industry. The Company relies heavily on imports, as the raw materials for its finished products are entirely sourced from the world's leading suppliers in countries such as KSA, USA, UAE, Kuwait, Singapore, and Qatar. Raw materials are petrochemical derivatives and its prices remain highly volatile, thus Pearl Petro is exposed to the risk of volatility in the prices of crude oil. Pearl Petro is currently operating at the capacity of 17,500 MT for the Polypropylene (PP) department, with a utilization rate of ~85%. The Polyethylene (PE) department has a capacity of 45,000 metric tons with a utilization rate of ~70%. It is noteworthy that these capacities tend to vary depending on the season. The assigned ratings also support the favorable demand prospects of the industry in the domestic market. The Company generated a topline of PKR~ 7,985mln in 9MFY23 (FY22: PKR 8,689mln, FY21: PKR 5,698mln). Additionally, the Company's high product concentration increases its vulnerability to competitive, pricing and innovation risks. The ratings also factor in Pearl Petro’s working capital-intensive operations with moderately high inventory holding requirements and the vulnerability of its profitability to fluctuations in raw material prices.
The Company is actively progressing with its expansion plans, including installing a three-layer printing unit. This expansion initiative is anticipated to bolster the company's revenue streams and unlock potential growth opportunities. Moreover, Company exhibits a proactive stance in effectively managing its leverage exposure in order to reduce reliance on bank borrowing. The Company is moderately leveraged with sound financial indicators as of end-Mar’23.
The ratings are dependent upon sustainable revenue growth, along with improvement in profitability and coverage indicators and product diversification. An improved working capital cycle leading to improvement in liquidity could also trigger the ratings.

About the Entity
Pearl Petro Industry (Pvt.) Limited ("Pearl Petro" or "the Company") is a private limited company. Pearl Petro is a family-owned business. Major shareholding (72.73%) of the Company holds by the
founder - Mr. Munawar Hussain Malik while remaining shareholding of the Company lies with his daughter Ms. Bushara Fatima Malik (27.72%). Mr. Malik is the Founder & Chief Executive Officer
(CEO) of the Company. He has over three decades of professional experience. He is assisted 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.