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The Pakistan Credit Rating Agency Limited
Press Release

Date
07-Feb-22

Analyst
Sehar Fatima
sehar.fatima@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 of Ahmed Hassan Spinning Limited

Rating Type Entity
Current
(07-Feb-22 )
Action Initial
Long Term BBB
Short Term A2
Outlook Stable
Rating Watch -

The assigned ratings of Ahmed Hassan Spinning Limited (AHSL) reflect the adequate positioning of the Company in the relative universe. The Company specializes in manufacturing and export of yarn of an average count of 21/1 CDD. The installed capacity is 28,152 spindles. Board comprises four members; all the members are from the sponsor family. The Company’s management involves professionals looking after the operations of the Company. Sales mix compromises of local and as well as an export with export destinations in China and Korea. Management is eying additions in export destinations, going forward. Over the last few years, the Company’s topline is following a growing trend. During FY21, the Company’s revenues stood at PKR 4.3bln (FY20: PKR 3.6mln). Sales mix, dominated by export sales. The company enjoys an established customer base in the local market which drives the major revenue. Operating profits and net profitability recorded a sizeable improvement in the recent year whilst margins remain good. After a recent demerger from the group company, the management is focusing on harnessing related costs in addition to enhancing capacity. The financial risk matrix displays moderate leveraging and improvement in coverage compared to last year. Going forward, with planned capacity expansion, leverage is expected to increase. Hence, prudent management of affairs remains vital for the rating. The equity base is expected to improve going forward, after the conversion of subordinated debt and increase in share capital. During the period July-December FY21-22, textile exports surged 26 percent YoY, fielding $9.39 billion in total export remittances, as compared to $7.44 billion in the same period last year. This is attributable to the increase in demand for textile products internationally and the channeling of export orders toward the Pakistani market. On a YoY basis, the exports of value-added textile items increased in both quantity and value in December 2021. Going forward, the textile sector’s outlook is expected to stay positive in the medium term where the demand for textile products is expected to sustain. In the local market, the textile sector has recorded strong performance. Many players have also availed of the TERF scheme announced by the Central Bank. This will lead to the overall leverage of the sector increase; however, on relaxed financing rates. The sustainability of the demand pattern for the current higher orders from Europe and the USA remains essential for the feasible utilization of added capacity by textile players.
The ratings are dependent upon the management's ability to capitalize on growth opportunities in a competitive landscape, operate at optimal level and sustain margins, going forward. The governance framework and financial transparency need improvement. The company is expected to adhere to conservative financial discipline, which would be crucial to ratings.

About the Entity
The Company was incorporated on: 20th October, 2016 under the companies Ordinance 1984 as Ahmed Hassan Spinning Limited. The Company is family-oriented business therefore the ownership rests with Mian Muhammad Parvaiz (Late) family: Mr. Muhammad Aurangzeb (31%), Mr. Muhammad Jahanzaib (31%), Mrs. Waheeda Parvaiz (28%), Mr. Ahmed Hassan (6%) and Miss Faiza Parvaiz (3%).

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.