Lahore, November 25, 2022 (PPI-OT):Samad Rubber Works (Pvt.) Limited (‘SRW’ or ‘the Company’) is primarily engaged in the manufacturing and marketing of Apparel (woven garments in Denim and Twill and Outerwear), Unicellular Foams, Contact-Based Adhesives, followed by the supply of rubber/non-rubber and specialty fabric items to Pakistan Armed Forces, and technical textile products (stitched, inflatables, and fabricated). The ratings reflect SRW’s deep-rooted presence in local rubber and adhesive industry underpinned by the foundation stone for Samad Group – a known brand for industrial and consumer adhesives, retaining cumulative segment share of around ~25%.

With its longstanding history, SRW has built itself as an acclaimed player through channeling innovative products to defense/military. The Company is a compliant supplier of unicellular closed-cell foams to sporting industry, explicitly capturing ~90% market share by supporting Football manufacturing in Pakistan. As an affirmation of multi-brand strategy under its umbrella, the Company further entered into complete cut-to-pack denim woven garments, maintaining less than ~2% share in country’s total apparel exports in the face of direct competition from textile giants. Industries in Pakistan undergo considerable production cost pressures amidst high international energy prices and currency devaluation, thus challenging overall growth.

Subsequently, for the Company, most of the materials for diversified business units are not procured locally having a direct impact on margins, partially offset by the ability to pass on price hike to customers. Further, the Company’s strategic business unit of apparel is export-oriented and gets benefited in line with exchange rate volatility and rising international demand of fashion garments. As per management report, SRW’s revenues witnessed a significant growth of ~63% at end Jun-22 on back of better prices and more volume in core business segments; apparel sales contributed the highest, followed by foam, adhesives, defense, and a minimal portion from technical textile.

Profitability matrix of SRW is aligned with topline improvement. With precise manufacturing facilities and implementation of sophisticated MIS, SRW has led to achieve operational efficiency. Financial risk profile of the Company is demonstrated by efficient working capital management, healthy coverages, and comfortable cash flows. SRW’s capital structure is low leveraged, mainly encompassed STBs. Going forward, the execution of good governance practices coupled with formal controlling structure shall be required to ensure compliance at all levels and smooth running of business units.

The ratings are dependent on sustenance of Company’s position in its respective business niches and consistent growth under challenging environment. With revenue growth, profit margins and prudent financial performance shall remain imperative.

For more information, contact:
Analyst,
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore, Pakistan
Tel: +92-42-5869504-6
Fax: +92-42-5830425
Email: hammad.rashid@pacra.com
Website: www.pacra.com