PACRA Maintains Entity Ratings of Nishat Chunian Limited

Lahore, May 16, 2019 (PPI-OT): The ratings reflect Nishat Chunian Limited’s (Nishat Chunian) established business profile emanating from strong presence in textile sector. The company’s revenues have grown by ~9.7% in 9MFY19 mainly augmented by operational efficiency and currency devaluation as ~56% of its revenues comprises exports. The company has significant presence in spinning sector, as it’s the largest contributor to its revenue base. Prudent procurement of cotton in FY18 led to inventory gains which supplemented profitability.

The company has a highly leveraged structure with borrowing utilized for working capital and capex. Working capital cycle is stretched, though in line with peers; any improvement will bring efficiency. Recent hike in interest rate may stretch the coverage though remaining at adequate level. Ratings take comfort from Nishat Chunian’s dividend stream from its subsidiary – Nishat Chunian Power Limited – an Independent Power Producer. Dividend stream supports company’s cashflows, strengthening its overall financial profile. The dividend income is expected to remain low due to prevailing liquidity situation in power sector.

The ratings are dependent on the management’s ability to sustain its margins while improving growth in revenue. Sustainability of non-core income and prudent management of the working capital are important. Maintaining coverage amidst rising interest rates would remain critical.

For more information, contact:
Analyst
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425
Email: hammad.rashid@pacra.com
Web: www.pacra.com

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