Karachi: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Bhanero Textile Mills Limited (BHAT) at 'A+/A-1' (Single A Plus/A-One) as of January 31, 2025. The medium to long-term rating of 'A+' indicates good credit quality with adequate protection factors, while the short-term rating of 'A1' signifies a strong likelihood of timely repayment of short-term obligations, supported by excellent liquidity factors. The outlook on the assigned ratings remains 'Stable'. This reaffirmation follows the previous rating action announced on September 26, 2023.
Bhanero Textile Mills Limited, with its 45-year legacy in yarn production for the export market, particularly denim manufacturing, and its offerings in greige and dyed fabrics and made-up articles, continues to be supported by a robust sponsor group strength and sustained client relations. These factors play a crucial role in maintaining the company's strong standing in the textile sector.
According to information available from Pakistan Stock Exchange (PSX), the reaffirmed ratings take into account the business risks arising from the high-interest rate environment, inflationary pressures, volatility in raw material prices, and the ongoing energy crisis in the country. Additionally, the sensitivity of textile exports to the economic health and regulations of key export destinations, including the USA, UK, EU, and China, poses challenges to the sector regarding margin sustainability and future growth over the medium term.
The financial risk profile assessment of Bhanero Textile Mills Limited reflects a notable growth in exports, which account for over 45% of the total revenue. The reaffirmed ratings also highlight strong revenue growth, although margins were adversely impacted in FY24 due to higher raw material and energy costs, coupled with high interest rates. The liquidity profile remains adequate with an improvement in cash conversion cycles, though debt coverages were strained. A slight increase in capitalization indicators was observed in FY24, with further improvement noted in 1QFY25.
Management anticipates a rebound in the second half of the fiscal year as raw material prices stabilize and a transition towards renewable energy sources, along with a fall in interest rates, is expected to support margins. Going forward, improvement in profitability and coverage metrics, along with the realization of recovery plans, will remain essential for future ratings and the company's sustained growth in the designated market category.