Analyst
Tasveeb Idrees
Tasveeb.Idrees@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
Related Research
PACRA Maintains Entity Ratings of Din Textile Mills Limited
Rating Type | Entity | |
Current (06-Sep-24 ) |
Previous (08-Sep-23 ) |
|
Action | Maintain | Maintain |
Long Term | A- | A- |
Short Term | A2 | A2 |
Outlook | Stable | Stable |
Rating Watch | - | - |
The ratings of Din Textile Mills Limited (“DTML” or “the Company”) reflect the sponsor's prominent profile in diversified business segments. The Company is equipped with state-of-the-art machinery in its spinning, weaving, and dyeing units. The Company’s product slate divests into combed compact yarn, core spun lycra yarn, slub lycra yarn, dyed yarn, melange yarn, ply yarn, gassed yarn, knitwear yarn, greige fabric, and bleached cotton web for surgical and cosmetic use. In terms of segment-wise revenue contribution, spinning is the foremost segment followed by weaving. During 9MFY24, the Company’s topline showed an improvement on a YoY basis, reaching PKR 29.6bln (9MFY23: PKR 23.0bln), primarily driven by local sales. There is a strategic shift in the knitwear yarn category by moving from the export to a local segment on account of favorable product pricing and margins. The Company's top clients and suppliers are established and stable entities. The Company’s margins dipped on the back of the inflated cost of production due to expensive raw material procurement and elevated energy tariffs coupled with magnified finance cost. The Company has already commissioned a solar project for 3.5MW and 4.5MW solar is in the installation phase to manage the energy cost risk primarily financed through the subsidized borrowings from SBP. A gradual shift in international demand patterns and consumption trends for yarn and greige fabric has been observed mainly due to the global recession and changing customer preferences. The management of the Company is mindful of coping with these challenges adeptly and is progressing into the value-added segment (towels) on a small scale, initially through toll manufacturing, while also initiating the stitching segment to cater to the export made-up market, executing minimal CAPEX by utilizing the existing building structure. This would diversify the revenue streams by exploring new potential export markets and strengthening the sustainability profile of the Company. The financial risk profile of the Company is considered adequate with minute improvement in coverages and cashflows. The working capital requirements of the Company are primarily met through internally generated cashflows followed by short-term borrowings. The Company has maintained a leveraged capital structure. The ratings take comfort from the sponsor's commitment to providing financial support and some equity injection expected to create a cushion in the financial matrix of DTML.
The ratings are dependent on intact business operations under the current economic conditions and draw comfort from the sponsor profile. Improving margins, healthy coverages, and capital structure while growing the business profile remains critical for the Company. Any deterioration in the financial profile will have a negative impact on the ratings.
About
the Entity
Din Textile Mills Limited (Din Textile or DTML) is a public limited company, incorporated in 1988. It is engaged in the manufacturing and sale of yarn and griege fabric. The Company’s operational spectrum encompasses spinning, weaving and dyeing. The overall control of the Company vests in a nine-member board chaired by Mr. Shaikh Muhammad Jawed. The board has an equal representation of non-executive directors, executive directors and independent directors. The CEO, Mr. Shaikh Muhammad Naveed manages the day-to-day operations of the Company. He is supported by a team of experienced professionals.