Lahore, October 13, 2021 (PPI-OT): Habib Construction Services Limited has been in the construction industry for many decades. Company has delivered multiple, public and government projects of which the completion spanned a number of years. The Company mostly undertake large infrastructure projects in collaboration with different JV partners including Chinese and Japanese. Realization of disputed claims of ~PKR 3.6bln regarding Orange line project, delivered by the Company, can improve its liquidity. HCS is now focused towards multi-lateral financed and multiple small projects. Company has taken up a project of Construction Sheranwala Flyover, costing ~PKR 2.6bln, revenue spreading over two years till FY22.
Along with pick up in construction sector and new projects, Company’s performance has followed an up surged trend and reported a net profit of ~PKR 33mln in FY21 (FY20: -104mln). However, to maintain its competitive advantage company needs to explore the new avenues. A heavy risk absorption capacity through sizeable equity provide comfort to the ratings. Company’s rating reflects the necessity for securing more projects that could generate a sustainable revenue after FY22.
Stoppage of various projects, related to Bahria town Islamabad for uncertain time period will remain critical to the ratings. High reliance on non-funded short-term lines shows an increasing liquidity pressure. Certainty of project pipeline, along with easing out the rating pressure, will initially increase the company’s reliance on short term borrowing and non-funded lines. Meanwhile, timely release of funds from diversified projects will bode well for the company’s ability to pay its obligation.
The ratings are dependent on sustaining a steady revenue stream and maintaining a low leveraged capital structure. Any prolonged downturn in subdued business volume can negatively affect the ratings. Good corporate governance practice is considered essential.
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