Analyst
Tasveeb Idrees
Tasveeb.Idrees@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
Related Research
PACRA Maintains the Entity Ratings of Stylers International Limited
Rating Type | Entity | |
Current (23-Oct-24 ) |
Previous (23-Oct-23 ) |
|
Action | Maintain | Maintain |
Long Term | A | A |
Short Term | A1 | A1 |
Outlook | Stable | Stable |
Rating Watch | - | - |
The ratings of Stylers International Limited (“the Company” or “SIL”) reflect the US group's prominent profile in the competitive textile landscape and value-added business segment. The Group has established a firm footing in the international denim industry through its state-of-the-art production mechanisms and has built the capacity to produce top-notch quality products. It aims to grow by protecting its core business, moderately diversifying into attractive segments, and implementing good governance for the long-term sustainability of the organization. SIL is categorized under the new venture vertical of the US group, along with its workwear business segment. The Company has developed expertise in producing a wide range of denim jeans, denim shorts, jackets, shirts, trousers, cotton jeans, twill and various kid’s wear products. The denim jeans is the best-selling product in terms of volume. SIL is an export-oriented textile unit having export sales of PKR 14.0bln during FY24 (FY23: PKR 14.5bln) with a minute share of local sales at PKR 250.6mln (FY23: PKR 440.5mln). The Company’s topline largely remained intact in volumetric terms while the dip in monetary value is mainly attributable to a shift in the product mix and an adequate pricing matrix from customers. Europe is the Company’s leading export destination. During FY24, the Company progressively ventured into kids' wear and denim shorts, which benefited the topline by catering to peak-season customer demands during the summer. The Company’s margins dipped minutely due to an escalated energy tariff. The Company's bottom line stood at PKR 1.47bln as of FY24 (FY23: PKR 2.52bln). The business sustainability takes comfort from SIL’s long-term association with well-established and stable international brands/entities as their top clientage. The management of the Company is mindful of implementing a client consolidation strategy to optimize concentration risk. SIL's "Sunshine" project is in its final stages of completion and is expected to be fully operational by 1QCY25; with an estimated cost of ~PKR 10bln; financed through the right issue and internally generated cashflows. This is coupled with a more systematic production mechanism to enhance the control environment of the facility. SIL has installed a ~1.6 Mega Watt Solar power plant, strengthening its operational resilience while contributing positively to environmental stewardship in the industry. The Company's financial risk profile is considered strong with an aptly managed working capital cycle. SIL maintained a minutely leveraged capital structure with stable coverages and cashflows. The ratings incorporate the transition in the Company's status to a publicly listed Company following the merger of AEL Textile Limited with Stylers International Limited.
The ratings are dependent upon the intact business operations under the current economic conditions and draw comfort from the sponsor’s profile. Improvement in margins, maintenance of coverages and cashflows at an optimal level while expanding business volumes remains critical.
About
the Entity
SIL, established in 1991, was listed on PSX on January 02, 2024. The ownership structure indicates that the sponsors hold a significant stake (99.65%), with Individuals accounting for 78.24% and Associate companies for 21.41%. The remaining shares rest with the general public (0.31%) and other stakeholders (0.04%). The composition of the board (four non-executive members; one executive and two independent directors), is indicative of a sound governance framework.