Lahore, June 28, 2019 (PPI-OT): The ratings reflect adequate business profile of Mahmood Textile – the flagship entity of Mahmood Group. Business operations comprise a spinning segment and two weaving units. Continuous BMR activities have led the Company to witness decent growth in topline in recent years, furthered in the current year due to installation of a new weaving unit.
Due to recent devaluation of rupee, the Company has managed to improve gross margins; however, high finance cost have kept operating margins thin. The Company has a sizable investment portfolio which is managed at Group level. Although, the Company has invested in blue-chip stocks, high market risk exposes the Company to volatile returns and valuations, mitigated to some extent through diversification in investment mix.
Recent volatility in the stock market, however, diminished portfolio performance and impacted the overall profitability. The concern magnifies as these investments are partially financed through short-term borrowings. Financial risk of the Company remains stretched given tight borrowing capacity and core debt service coverages. Free cashflows have shown improvement. This provided relief to the risk profile of the Company; sustainability of the same is important amidst rising interest rates. Association with Mahmood Group bodes well for the Company.
The ratings are dependent upon stability of business margins, prudent management of investment portfolio and financial profile. Better debt management, especially short-term borrowings, and improvement in core coverages is critical. Significant losses in investment portfolio, leading to lower profitability, and/or deterioration in coverages may impact the ratings negatively.
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