PACRA maintains Entity Ratings of Hi-Tech Feeds (Pvt.) Limited

The ratings reflect Hi-Tech Feeds (Pvt) Limited's association with the well-established Hi-Tech Group, a prominent and diversified conglomerate. As a key component of the Group, Hi-Tech Feeds benefits from the collective strength of various specialized entities within the Group. These include Hi-Tech Poultry Breeders, which specializes in the breeding of day-old chicks and broiler farming; Hi-Tech Feeds, offering premium poultry, cattle (Wanda), and aqua feeds; Hi-Tech Grain Mills, renowned for producing high-quality Basmati rice; Hi-Tech Aqua, focused on fish feed production; Hi-Tech Edible Oil, engaged in the production of refined, bleached, and deodorized (RBD) edible oil; Hi-Tech Wanda, dedicated to producing superior cattle feed; and Perfect Pet Company Private Limited, which provides high-quality pet food. The Group's broad operations and its integrated approach significantly bolster Hi-Tech Feeds' market position, supported by a favorable feed conversion ratio (FCR). The board of the Company is supported by qualified DVMs associated with the poultry feed industry. The poultry industry contributes around 1.3% to the country's gross domestic product (GDP) and directly and indirectly employs approximately 1.5 million people. It produces about 1.3 billion kilograms of poultry meat and over 18 billion eggs annually, providing a critical source of affordable protein for the population. Poultry farming has grown significantly over the past few decades, becoming an important sector of the national economy. The Company is susceptible to inherent risks within the feed industry, stemming from fluctuations in raw material prices. However, the Company has maintained a positive growth trajectory this year, achieving approximately 14% growth during FY24. The company's revenue stream is primarily concentrated in poultry feed (91%), followed by Wanda feed (8%). Revenue growth was fueled by a combination of market share expansion and strong demand in the poultry product segment. Gross profit margins saw a notable 26% increase, driven largely by favorable sales volume leverage. Additionally, operating profit margins improved significantly, rising by 38% due to effective cost control measures and streamlined management of operating expenses. The Company showcased resilience in its bottom-line performance, effectively navigating the challenge of higher financing expenses by demonstrating its ability to pass increased raw material costs on to its customers. The Company's capital structure exhibited moderate leverage, with a substantial reliance on short-term debt obligations. The improved coverage ratio is a testament to the Company's FCFO. The ongoing support from its sponsors augurs well for the assigned ratings.
The ratings are dependent on the management's ability to sustain its operations and improve capacity utilization. Maintaining strict working capital discipline through prudent inventory management and rationalizing significantly high receivable days and ensuing borrowings remain critical. Any significant deterioration in margins and/or prolonged low sales cycle will have a negative impact on the ratings. Support from sponsors and other group entities is important.

About the Entity
Hi-Tech Feeds (Pvt) Limited is a prominent venture of the 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 feed manufacturing facility situated in Sahiwal, with a production capacity of 350,000 MT. 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 sponsors, who also serve as directors on the board, hold veterinary degrees and are well-equipped with relevant industry knowledge. Dr. Muhammad Arshad serves as the CEO of the company.