Karachi, March 18, 2019 (PPI-OT): VIS Credit Rating Company Limited (VIS) has assigned initial long term entity rating of ‘A-’ (Single A Minus) and short term rating of ‘A-1’ (A-One) to Lucky Knits (Private) Limited (LKPL). Long Term Rating of ‘A-’ signifies good credit quality and adequate protection factors while risk factors may vary with possible changes in the economy. Short Term Rating of ‘A-1’ indicates high certainty of timely payment, excellent liquidity factors supported by good fundamental protection factors and risk factors are minor. Outlook on the assigned ratings is ‘Stable’.
LKPL is part of Yunus Brother Group (YBG). The company is engaged in the manufacturing and exports of knitted apparel with product line ranging from T- shirts, polo shirts, hoodies, trousers and undergarments. Operations of the company are carried out through four production units (Two Cut to Pack, One Knitting and One Dyeing Unit) located in Karachi, Sindh. All the production segments operated at nearly full capacities during FY18 and 1HFY19. Power requirements of the organization are met by Lucky Energy (YB Group Company) which is a gas based power plant and provides competitive edge to LKPL.
Assigned ratings favourably factor in LKPL’s healthy growth outlook, favourable business risk profile, conservative financial policy as reflected by existing low leverage capital structure and strong liquidity profile. Ratings also incorporate the company’s existing revenue base and equity size, client wise concentration and evolving risk profile. Ratings draw support from demonstrated track record of support from YBG, a reputable conglomerate with strong financial profile and presence in diversified sectors including textiles, building materials, real estate, power generation, chemicals, pharmaceuticals, food and automotive sectors. Overall corporate governance framework is being improved through installation of a state of art ERP. Room for improvement in board composition and oversight remains.
Improvement in profitability margins has been noted since FY17 and is attributable to shift in strategy towards higher value added products, significant rupee devaluation and rationalization of expenses. Furthermore, net portability was also supported by duty drawback and export rebate received. Given shift in the sales mix, contribution of T-Shirts/Polo segment in export sales has increased considerably followed by Hoodies and Trousers.
Previously, undergarments for a major customer used to constitute the bulk of sales. Given the exit of the said customer from the Pakistani market, geographical concentration in sales has reduced. Major export markets include USA, UK and Germany. Given the ongoing and planned capacity and efficiency enhancement projects, net sales are projected to depict strong double digit growth over the rating horizon.
For more information, contact:
Director Compliance and Rating Analytics,
VIS Credit Rating Company Limited
VIS House, 128/C, 25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi, Pakistan