PACRA Maintains the Entity Ratings of Lucky Tex Pakistan (Pvt). Limited

The assigned ratings of Lucky Tex Pakistan reflect the adequate positioning of the company in the relative universe. It’s a family-owned private company where ownership rests equally among two shareholders. The position of Chairman and CEO is segregated. The Company’s management involves experienced professionals, aided by good reporting. The company has a broad product slate including Fabric, Bed Linen, Curtains, and Kitchen Articles. During FY22, the company’s revenue base improved to PKR 3bln (FY21: PKR 2.9bln) where the sales mix remained tilted towards the export market. The net profitability was recorded at PKR 102mln (FY21: PKR 211mln). The company was able to maintain the margins and coverages. The free cash flows from operations need to be managed prudently. Customer concentration has remained high, during the last few years. The financial matrix reveals a low leveraging and improved working capital cycle. The equity base of the Company is reflecting a comfortable position with good risk absorption capacity. During 1HFY23, the company’s top line displayed a slight decline YoY at PKR 1.4bln (1HFY22: PKR 1.6bln). The dividend income demonstrated improvement whereas the finance cost remained largely the same. The company’s bottom line reflected a sizeable improvement YoY to stand at PKR 80mln. Going forward, with challenging macroeconomic indicators, the business profile should be sustained along with liquidity indicators.
During 7MFY23, the textile exports were valued at $10.08bln compared to $10.93bln, reflecting an 8% decline YoY – the declining trend has been recorded in the last few months. The decline in exports is driven by attrition in the demand pattern of export avenues. The hike in cotton prices and low demand for yarn in international markets is also a challenge. The analysis of 5MFY23 reveals that among value-added items, bedwear has witnessed the largest decline of 19% (on an MoM basis), down to $217 million. Knitwear remained on the downward path in October 2022 and declined by 10% to $392 million. Among non-value-added items, the cotton yarn has shown the largest decline of 35%. Moreover, a slowdown is prevailing in textile demand amid burgeoning inflationary pressures in the exporting destinations, especially in the US and European countries. The demand pattern is expected to improve post-Jun-23.
The ratings are dependent upon management’s ability to improve margins, profitability, and financial profile. This includes avoiding any asset-liability mismatch that may arise and effectively managing its position in a competitive segment. Any deterioration in debt coverage leading to higher financial risk or subdued profitability will have a negative impact on ratings.

About the Entity
Lucky Tex Pakistan (Pvt.) Limited commenced operations in 1993, its foundation laid by Mr. Ahmed Tabba. The Company’s Processing Unit is geared to handling fabric widths up to 3.2 meters and weights from 80 - 300 gms/square meter. Lucky Tex Cut to pack division is designed and equipped for a daily production of about 5,000 curtain pairs and 10,000 bed sets (Filled / Unfilled) and it is divided into seven sub-divisions. A Power Generation Plant was also installed in the year 2000 to fulfill power requirements. Mr. Ahmed Tabba is the founder and Chairman of the Company and has been involved in the textile business for 38 years. The Tabba family was involved in the trading business, and until 1983 were commercial importers and exporters on the pattern of Japanese trading companies.