Analyst
Muhammad Atif Chaudhry
Atif.Chaudhry@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
Related Research
PACRA maintains entity ratings of Guard Agricultural Research and Services (Pvt.) Limited
Rating Type | Entity | |
Current (24-Oct-24 ) |
Previous (24-Oct-23 ) |
|
Action | Maintain | Initial |
Long Term | A- | A- |
Short Term | A2 | A2 |
Outlook | Stable | Stable |
Rating Watch | - | - |
The ratings reflect Guard Agricultural Research & Services (Pvt.) Limited’s strengthening business position within the agriculture and food sector. The Company’s packaged basmati is marketed domestically and exported under its brand name to 45 countries across Asia, the Middle East, North America, Africa, Europe, and Australia. The Guard Group has demonstrated a strong track record of performance across multiple sectors, including the automotive industry, food products, lubricants, auto parts, friction materials, and HEPA filters. The distinguished background of the sponsoring family enhances the Company’s credit profile. The Company’s Board is largely composed of members from the sponsoring family. The Board is further supported by its sub-committees and a seasoned management team, which collectively enable the Company to navigate the challenges inherent in the rice sector effectively. Industry insights reveal that Pakistani rice exporters generated a historic $3.93 billion foreign exchange during FY24, exporting ~6mln tons of rice. This achievement was largely facilitated by India's temporary ban on rice exports following a short crop, positioning Pakistan to capitalize on its competitive standing in the global market, where India remains a key rival. The Company reported a notable increase in sales, reaching PKR 10bln in FY24 (FY23: PKR 8bln), reflecting a robust growth rate of 23%. This growth was primarily driven by a significant rise in exports (FY24: PKR 9bln, FY23: PKR 8bln). This performance underscores the Company's expanding market presence and its ability to capitalize on international demand. The Company demonstrated stability in FY24, achieving an improvement in gross margins to ~14.7%, which signals enhanced operational efficiency. The net profit margins also remained stable at 4% for both FY24 and FY23, reflecting steady bottom-line performance despite rising costs. As a result, the Company’s net profit increased to ~PKR 427mln in FY24 (FY23: ~PKR 344mln), despite the increasing finance costs. This indicates resilience in the face of macroeconomic challenges. The Company’s capital structure is assessed as sound, underpinned by its reliance on short-term borrowing to manage working capital requirements. Leverage reduced to ~18.3% in FY24 (FY23: ~26.4%), reflecting a prudent approach to managing financial exposure. Furthermore, ratings take comfort from the sponsors’ depth of experience and unwavering commitment to accelerating the Company’s growth, this reinforces the ratings and strengthens the outlook for sustained operational success.
The ratings are dependent upon brand reputation through customer satisfaction, which subsequently yields amplified business expansion. Adherence to sound financial discipline while strengthening debt servicing capacity through improved cash position is vital for the ratings. Positive outcomes of future projects and sustainability of profits remain imperative for the sustenance of ratings.
About
the Entity
The Company is part of the Guard Group, started in 1948 with a strong foothold in the filters & lubricants industry, and was incorporated in 1989. The Company has bifurcated its operations into two divisions: Agriculture and Food. The agriculture division includes trading of imported hybrid & local hybrid seeds under the brand name of ‘Guard’ & imported agricultural machinery. While the Food division includes the processing of basmati rice and trading of pasta & salt under the brand name of ‘Guard’. The Company’s major ownership resides with brothers Mr. Iftikhar Ali Malik (24.24%), Mr. Shahbaz Ali Malik (24.24%), Mr. Waqas Ali Malik (11.64%), Mr. Shahzad Ali Malik (27.25%), and Mr. Hamza Waqar Malik (12.60%).