PACRA Upgrades the Entity Ratings of Yunus Textile Mills Limited

The rating upgrade of Yunus Textile Mills Limited (YTML) derives its rationale from the Company's excellent performance. YTML has reported record-high profits, reflecting positively on its business risk profile. While many of the large textile players faced challenges in terms of sustaining margins, YTML displayed higher performance in its core business. This was further supplemented by the other income stream. The ratings, among other factors, reflect the sponsor’s well-established and diverse business profile spread across three verticals; Textile, Energy and Real Estate within the country’s economy. Yunus Brother Group (YBG) operates with a vision to prosper through continuous diversification, innovation, and localization aiming to improve the quality of life by setting new standards in integrity and philanthropy to create a lasting impact on society. YTML is considered the flagship Company of one of the largest textile conglomerates. It is a vertically integrated unit encompassing all aspects of the textile value chain from spinning to made-ups. The Company specializes in a broad range of home textile products, including comforter sets, duvet sets, coverlets/quilts, sheet sets, shower curtains, window curtains, and decorative pillows. The Company is equipped with state-of-the-art production mechanisms and cutting-edge computerized processes supported by continuous BMR and expansion activities in the preceding years to meet the high-quality product standards of top international brands. A significant portion of the Company’s revenue is parked with export sales (FY24: PKR 75.8bln; FY23: 66.2bln) with a contribution of 95.6% on a standalone basis. In volumetric terms, YTML’s top-selling product is made-ups, followed by finished fabric, grey fabric, and yarn. Made-ups hold an apex position in the business valuation matrix of YTML. The Company enjoys geographical diversification with its offices in USA and France, enhancing its customer base. The installation of ~33.85 megawatt solar and wind turbine has comforted the GP margin via optimizing escalated energy cost risk. The Company is in the process of installing a ~9.60 MW wind turbine, which is expected to become operational by the end of February 2025. The dividend income of PKR 4.0bln as of FY24 from a large strategic investment book has augmented the profitability matrix of the Company. The management is mindful of coping with the financial cost risk and reduced the size of its borrowing book by offloading its short-term debt. The Company’s bottom line illustrated a sizeable improvement reaching PKR 16.0bln (FY23: PKR 14.0bln). The Company fuels its working capital requirements through internally generated cash flows which has beefed up the coverages. The financial risk profile is considered strong, with a well-managed working capital cycle coupled with a low-leverage capital structure demonstrating ample borrowing capacity. Going forward, the management seeks to drive further growth by preserving its core operations and maintaining its steadfast client ties.
The ratings are dependent upon the intact business operations under the current economic conditions and draw comfort from the sponsor’s profile. Improvement in margins, maintenance of coverages and cashflows at an optimal level while expanding business volumes remains critical.

About the Entity
YTML, a public unlisted Company incorporated in 2007, is a wholly owned subsidiary of YB Holdings (Private). Limited operating under the umbrella of Yunus Brother Group. The Company is engaged in manufacturing and export of knitted, weaved and stitched fabrics and other textile articles. The Company's board comprises eight members, chaired by Mr. Muhammad Ali Tabba.