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The Pakistan Credit Rating Agency Limited
Press Release

Date
15-Jan-19

Analyst
Faiqa Qamar
faiqa.qamar@pacra.com
+92-42-35869504
www.pacra.com

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This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Assigns Initial Entity Ratings to Hi-Tech Feeds (Pvt.) Limited

Rating Type Entity
Current
(15-Jan-19)
Action Initial
Long Term BBB-
Short Term A3
Outlook Stable
Rating Watch -

Among the largest agro based segments in Pakistan, poultry holds a prominent place. In Pakistan, formal feed manufacturing started in early 1960. With 350 poultry feed mills and home mixtures, the country annually produces around 8 MMT of poultry feed. This industry directly derives its demand from poultry – chicken and eggs consumption. With growing income levels and expanding population, the industry is experiencing ~ 4 to 5% growth.

The ratings reflect Hi-Tech Feeds (Pvt.) Limited association is with an established poultry group, Hi-Tech Group. The Company enjoys a moderate market share and is considered to be a quality producer with good Feed Conversion Ratio. However, it has been experiencing declining turnover due to an increase in the efficiency of poultry feed and higher competition as many small players have entered the market. The margins remain on the lower side when compared to peers. The Company's margins are dependent on timely purchase of key raw materials, which leads to higher working capital requirement. Therefore leveraging is characterized as high, consisting of short-term borrowings only, to fund the inventory and provide financial support to other Group Companies. The Company's coverages remain stressed.

The ratings are dependent on the management's ability to build profitable volumes while improving its margins. Financial discipline remains crucial. Envisaged improvement in business and financial profile along with strengthening of governance framework would be beneficial. Any further deterioration in margins and/or coverages will have negative impact on ratings.

About the Entity
Hi-Tech Feeds (Pvt.) Limited is a prominent venture of Hi-Tech Group, which has diversified vertically across the poultry supply chain. The Company was incorporated in 1985 and is primarily engaged in manufacturing and selling poultry feed variants for birds of different types and age groups. The Company has two feed manufacturing facilities situated in Lahore and Sahiwal, with a production capacity of 100 MT per hour and 90 MT per hour, respectively. The quality of feed produced is ranked best among competitors.

Hi-Tech Feeds' is equally (25%) owned by Dr. Muhammad Arshad, Dr. Abdul Qayyum, Dr. Muhammad Asim Khan and Dr. Anwar Mahmood Randhawa. All four Directors hold a veterinary degree and are very well equipped with the relevant industry's knowledge. Dr. Muhammad Arshad laid the foundation of the Group and leads it and the Company as its CEO. He is assisted by a team of experienced professionals.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.