Rating History
Dissemination Date Long-Term Rating Short-Term Rating Outlook Action Rating Watch
17-Jan-25 BBB A2 Stable Maintain -
17-Jan-24 BBB A2 Stable Maintain -
17-Jan-23 BBB A2 Stable Initial -
About the Entity

Dynamic Packaging (Pvt.) Limited was founded as a private limited company on 23rd June 2004 and is currently engaged in the commercial production of Flexible and Pharmaceutical Packaging. The Company’s manufacturing plant is located in Raj Industrial Park Dullu Kalan. The Company is wholly owned by the sponsor family with major ownership of ~72% residing with Mr. Ashraf Ch, followed by Mr. Waqas Ashraf and Ms. Shazia Ashraf hold respectively ~20% and ~8% ownership of the Company.

Rating Rationale

Dynamic Packaging (Pvt.) Limited (‘DP’ or the ‘Company’) is predominately manufacturing different types of Flexible Packaging, Pharmaceutical Sachet, Tropical Blister Foil, Aluminum Blister Foil, and Cold Forming Aluminum Foil packaging. The Group's businesses include i) Dynamic Packaging (Pvt.) Limited ii) Global Inks & Chemicals (Pvt.) Ltd iii) Royal Traders. The Company is backward integrated wherein, Global Inks & Chemicals (Pvt.) Ltd provides a complete range of solvent-based ink systems for the Rotogravure and flexographic printing industries across Pakistan. The demand for packaging products is mainly derived from the food and pharmaceutical industry. The strong customer base of the Company bodes well for the assigned rating. The sponsor’s family has vast experience in packaging and has been engaged in this business since 2004. The raw material of the finished product is ~100% imported hence, exposed to exchange rate risk. As per management representation, the Company has captured a good share of the flexible packaging market. While being the sole manufacturer of pharmaceutical packaging in Pakistan, the Company holds ~ 5% market share, the rest of the market of ~95% is captured by importers. In FY24, the capacity utilization for flexible packaging was approximately 82.7%, while for pharmaceutical packaging, it was around 28.5%. While growth in the pharmaceutical sector is expected to drive an increase in capacity utilization, it remains on the lower side due to the six-month lead time required for product testing and viability assessments by customers, which also helps establish a sustainable customer base.
In FY24, Dynamic Packaging generated a topline of ~ PKR 7,020mln (FY23: ~PKR 6,321mln) and bottom line of ~PKR 241 (FY23: ~PKR 206mln). Equity stood at ~PKR 2,315mln at the end of FY24 (FY23: ~PKR 2,074mln). The Company is low leveraged with strong financial indicators as of the end of Jun’24. Additionally, the Company has planned to install a solar energy system with a total capacity of approximately 1.6 MW in three phases. The first phase is currently underway and involves the installation of 522 KVA of solar panels at the factory, expected to be completed by March 2025. The second and third phases, each with a capacity of 500 KVA, will be implemented, with the entire installation expected to be finished by the end of this financial year. Once fully operational, this solar initiative will significantly reduce the Company’s reliance on WAPDA electricity, powering the entire factory and machinery through solar energy.

Key Rating Drivers

The ratings are dependent upon the management’s ability to improve margins while sustaining its market share. Prudent management of the working capital and sufficient cash flows and coverages are essential for the ratings. Any significant change in margins and coverages will impact the ratings.

Profile
Legal Structure

Dynamic Packaging (Pvt.) Limited (‘DP’ or the 'Company’) was incorporated as a private limited company on 23rd June 2004.


Background

The Company provides flexible packaging products to customers of various industries including snacks, beverages, confectionery, pharma, etc. The main sponsor family has utilized his skills and experience to turn Dynamic Packaging (Pvt.) Limited into a competent contender in the flexible packaging industry


Operations

Dynamic Packaging (Pvt.) Limited provides different types of Flexible Packaging, Pharmaceutical Sachet, Tropical Blister Foil, Aluminum Blister Foil, and Cold Forming Aluminum Foil packaging to customers of various industries. The total installed capacity of the manufacturing plant in FY24 was ~12,500 MT (FY23:~11,400 MT), while the actual production remained at ~ 8,066 MT during FY24 (FY23: ~8,010 MT). Actual capacity utilization was ~64.5% during FY24 (FY23: ~70.2%).


Ownership
Ownership Structure

Majority stake of Dynamic Packaging (Pvt.) Limited lies with Mr. Ashraf Ch who owns ~72% of the total shares. Mr. Waqas Ashraf and Ms. Shazia Ashraf hold respectively ~20% and ~8% ownership of the Company.


Stability

The ownership structure is stable as owners have vast experience in the packaging industry while having a personal stake in the business. Mr. Ashraf Ch also owns Global Inks & Chemicals (Pvt.) Ltd, established in 2008, the Company is providing a complete range of solvent-based ink systems for the Rotogravure & Flexographic printing industries across Pakistan. As per management representation, Global Inks holds a market share of ~7%.


Business Acumen

The owners and directors of Dynamic Packaging (Pvt.) Limited have extensive relevant experience and insights about the packaging industry owing to their family background. Mr. Ashraf Ch and Mr. Waqas Ashraf are involved in managing the affairs of the Company. Mr. Waqas Ashraf oversees all the Company's financial and tax-related affairs. While Mr. Ashraf Ch is involved in managing the operational activities of the Company.


Financial Strength

Dynamic Packaging (Pvt.) Limited is a stable business entity. The Company’s sister concern Global Inks & Chemicals (Pvt.) Ltd also has a broad portfolio of customers. This strong forward integration strengthens the customer's bond and gives a competitive edge through strong supply chain support. Mr. Ashraf Ch has significant resources to finance the Company if the need arises. The land on which the Company’s production facilities located are is owned by the entity.


Governance
Board Structure

The Company’s Board structure primarily revolves around its sponsor family. It consists of three directors: Mr. Ashraf Ch, the Chairperson, who also serves as the executive director, Mr. Waqas Ashraf Ch, another executive director; and Ms. Shazia Ashraf, a non-executive director. The absence of independent directors and board committees decreases governance oversight.


Members’ Profile

Mr. Muhammad Ashraf Chaudhry founded the Dynamic Group in 2004 and is currently the Chairperson of Dynamic Packaging (Pvt) Ltd. He is also serving as the CEO of Global Inks & Chemicals (Pvt) Ltd. He is L.L.B by qualification and holds various certifications in the Packaging, printing & Ink industries coupled with vast experience of around 37 years in leadership positions of different business ventures of his family. Mr. Waqas Ashraf joined Dynamic Packaging (Pvt.) Limited as an executive director in September 2017. He also serves as a director at Global Inks & Chemicals (Pvt.) Ltd and as the CEO at Royal Traders Pvt Ltd. Mr. Waqas holds a business degree from Queen Mary University (UK) and has completed training periods at HBL and Deutsche Bank’s foreign branches during his studies. Since joining the Dynamic Group, he has been responsible for overseeing the finance and marketing functions of the Group Companies. Ms. Shazia Ashraf, the wife of Mr. Ashraf Chaudhry, serves as a non-executive director of the Company. She holds a Master's degree and is also a director at Global Inks & Chemicals (Pvt) Ltd.


Board Effectiveness

As a family-driven Board, there is a strong sense of cohesiveness. The Board met four times during FY24, with the majority attending to discuss pertinent matters.


Financial Transparency

The Company’s external auditors, Qadeer and Company, Chartered Accountants have expressed an unqualified opinion on the financial statements for FY23. The auditors have a satisfactory QCR rating from ICAP.


Management
Organizational Structure

Dynamic Packaging (Pvt.) Limited has developed a defined organizational structure keeping in mind the Company’s operational needs. The Company has a lean organizational structure to control personnel costs while efficiently managing its operations.


Management Team

The management team comprises experienced professionals. Mr. Muhammad Ashraf Chaudhry is the Chief Executive Officer of the Company. Mr. Ahmad Yasir Ch the Chief Operating Officer has been associated with the Company since 2012. Mr. Ahmad has over 26 years of relevant experience and also has special expertise in the packaging industry. He has been working with the Company for over 12 years. The Company’s Chief Financial Officer, Mr. Qulb-E-Abbas, had an MBA in Finance and, an LLB and has over 14 years of relevant experience. He has been working with the Company for over 12 years.


Effectiveness

The experience of the sponsors along with a professional management team has helped the Company to streamline its operations and cut down on its costs. The production facilities have minimal wastage which is effectively managed through re-cycling and re-using in the process.


MIS

To generate MIS and operational reports, the ERP software, Tally 9 is being used. The Company is currently in the process to the implementation of SAP by outsourcing the software development function from Hussain and Choudhry Consulting.


Control Environment

The Company has developed an effective mechanism for the identification, assessment, and reporting of all types of risk arising out of the business operations because there is an internal audit department in place to ensure operational efficiency which operates under the direct supervision of directors.


Business Risk
Industry Dynamics

The price of the major raw material used in the making of plastic, Polyethylene Terephthalate (PET), is correlated with international oil prices. Any volatility in the oil prices and exchange rates is, therefore, a significant source of risk for this segment. The variability in oil prices during FY24 was mainly due to the supply chain disruptions caused by the war in the Middle East and increased raw material prices on a global level due to high inflation and interest rate hikes. However, during FY24, oil prices decreased by ~3.0% YoY due to low demand for oil from major importers like China due to the economic slowdown. (Source: PACRA Sector Study)


Relative Position

Dynamic Packaging (Pvt.) Limited has captured a good share of the flexible packaging and pharmaceutical packaging market. Major local players in the flexible packaging industry include Packages Convertors, Cherat Packaging, Century Paper and Dynamic Packaging (Pvt.) Limited. The Company is also the sole manufacturer of pharmaceutical packaging. As per management representation, the Company currently holds ~5% market share of pharmaceutical packaging, and the remaining ~95% market is held by local importers. While in flexible packaging, the competition is tough, however, the Company retained an adequate presence and strong customer base with long association.


Revenues

The Company generates revenue from the sale of flexible packaging and pharmaceutical packaging materials in the local market. The top line of the Company increased by 11% from ~PKR 6,321mln in FY23 to ~PKR 7,020mln in FY24.


Margins

In FY24, the gross profit margin and operating profit margin largely remained the same and reported at ~ 9.1% and ~ 6.7% respectively (FY23: ~ 9.1% and ~ 6.7%). Consequently, in FY24, the Company posted a net profit of ~PKR 241mln (FY23: ~PKR 206mln) with a net profit margin of ~ 3.3% (FY23: ~ 3.4%). 


Sustainability

Dynamic Packaging (Pvt.) Limited is a stable business entity with top customers such as Pepsi Cola Intl (Pvt) Ltd, Nestle Pakistan Ltd, and, National Foods Limited. The Company’s sister concern Global Inks & Chemicals (Pvt.) Ltd also has a broad portfolio of customers. Being the sole manufacturer of pharmaceutical packaging, there is significant potential for growth.


Financial Risk
Working capital

In FY24, the Company’s inventory days stood at ~54 days (FY23: ~51 days). Meanwhile, trade receivable days remained the same as last year at ~46 days, and trade payable days largely remained the same at ~9 days (FY23: ~8 days). Consequently, the Company’s net working capital days also largely remained the same during FY24 and stood at ~91 days (FY23: ~88 days). 


Coverages

In FY24, the Company’s Free Cash Flows from Operations (FCFO) stood at ~PKR 443mln increasing from ~PKR 407mln in FY23. The FCFO/Finance cost stood at ~ 3.1x (FY23: 3.1x), this is a good coverage level for the Company. While the Company does take only short-term financing from financial institutions, the strategy is to keep the Company mainly equity-focused, thus the finance cost is planned to be on a manageable scale moving forward.


Capitalization

The Company has a low-leveraged structure, with no long-term liabilities currently at the end of FY24. Its gearing ratio has decreased from ~ 31.4% at the end of FY23 to ~ 29.9% at the end of FY24, indicating that the Company does have debt, but it is not increasing its debt ratio currently and is instead relying more on organic growth. The Company obtains short-term debt to meet the working capital requirements, Short Term Borrowings (STB) currently stands at ~PKR 989mln increasing from ~PKR 947mln at the end of FY23.


 
 

Jan-25

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Jun-24
12M
Jun-23
12M
Jun-22
12M
A. BALANCE SHEET
1. Non-Current Assets 826 755 687
2. Investments 0 0 0
3. Related Party Exposure 0 0 0
4. Current Assets 2,647 2,475 2,044
a. Inventories 1,080 1,014 755
b. Trade Receivables 890 874 715
5. Total Assets 3,473 3,230 2,732
6. Current Liabilities 170 209 103
a. Trade Payables 158 198 95
7. Borrowings 989 947 760
8. Related Party Exposure 0 0 0
9. Non-Current Liabilities 0 0 0
10. Net Assets 2,315 2,074 1,868
11. Shareholders' Equity 2,315 2,074 1,868
B. INCOME STATEMENT
1. Sales 7,020 6,321 5,377
a. Cost of Good Sold (6,380) (5,749) (4,948)
2. Gross Profit 640 572 429
a. Operating Expenses (167) (155) (117)
3. Operating Profit 472 417 312
a. Non Operating Income or (Expense) 0 0 0
4. Profit or (Loss) before Interest and Tax 472 417 312
a. Total Finance Cost (144) (133) (97)
b. Taxation (88) (79) (67)
6. Net Income Or (Loss) 241 206 148
C. CASH FLOW STATEMENT
a. Free Cash Flows from Operations (FCFO) 443 407 303
b. Net Cash from Operating Activities before Working Capital Changes 299 275 208
c. Changes in Working Capital (157) (371) (44)
1. Net Cash provided by Operating Activities 142 (97) 165
2. Net Cash (Used in) or Available From Investing Activities (129) (132) (114)
3. Net Cash (Used in) or Available From Financing Activities 42 187 (22)
4. Net Cash generated or (Used) during the period 55 (41) 29
D. RATIO ANALYSIS
1. Performance
a. Sales Growth (for the period) 11.1% 17.6% 9.6%
b. Gross Profit Margin 9.1% 9.0% 8.0%
c. Net Profit Margin 3.4% 3.3% 2.7%
d. Cash Conversion Efficiency (FCFO adjusted for Working Capital/Sales) 4.1% 0.6% 4.8%
e. Return on Equity [ Net Profit Margin * Asset Turnover * (Total Assets/Shareholders' Equity )] 11.0% 10.4% 8.2%
2. Working Capital Management
a. Gross Working Capital (Average Days) 100 97 96
b. Net Working Capital (Average Days) 91 88 90
c. Current Ratio (Current Assets / Current Liabilities) 15.6 11.9 19.8
3. Coverages
a. EBITDA / Finance Cost 3.7 3.7 3.8
b. FCFO / Finance Cost+CMLTB+Excess STB 3.1 3.1 2.8
c. Debt Payback (Total Borrowings+Excess STB) / (FCFO-Finance Cost) 0.0 0.0 0.1
4. Capital Structure
a. Total Borrowings / (Total Borrowings+Shareholders' Equity) 29.9% 31.4% 28.9%
b. Interest or Markup Payable (Days) 19.3 17.0 21.3
c. Entity Average Borrowing Rate 14.8% 15.5% 13.7%

Jan-25

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