Press Release

VIS Credit Rating Company Assigns Initial Entity Ratings to Lucky Knits (Private) Limited

Karachi, March 18, 2019: VIS Credit Rating Company Limited (VIS) has assigned initial long term entity rating of ‘A-’ (Single A Minus) and short term rating of ‘A-1’ (A-One) to Lucky Knits (Private) Limited (LKPL). Long Term Rating of ‘A-’ signifies good credit quality and adequate protection factors while risk factors may vary with possible changes in the economy. Short Term Rating of ‘A-1’ indicates high certainty of timely payment, excellent liquidity factors supported by good fundamental protection factors and risk factors are minor. Outlook on the assigned ratings is ‘Stable’.

LKPL is part of Yunus Brother Group (YBG). The company is engaged in the manufacturing and exports of knitted apparel with product line ranging from T- shirts, polo shirts, hoodies, trousers and undergarments. Operations of the company are carried out through four production units (Two Cut to Pack, One Knitting and One Dyeing Unit) located in Karachi, Sindh. All the production segments operated at nearly full capacities during FY18 and 1HFY19. Power requirements of the organization are met by Lucky Energy (YB Group Company) which is a gas based power plant and provides competitive edge to LKPL.

Assigned ratings favorably factor in LKPL’s healthy growth outlook, favorable business risk profile, conservative financial policy as reflected by existing low leverage capital structure and strong liquidity profile. Ratings also incorporate the company’s existing revenue base and equity size, client wise concentration and evolving risk profile. Ratings draw support from demonstrated track record of support from YBG, a reputable conglomerate with strong financial profile and presence in diversified sectors including textiles, building materials, real estate, power generation, chemicals, pharmaceuticals, food and automotive sectors. Overall corporate governance framework is being improved through installation of a state of art ERP. Room for improvement in board composition and oversight remains.

Improvement in profitability margins has been noted since FY17 and is attributable to shift in strategy towards higher value added products, significant rupee devaluation and rationalization of expenses. Furthermore, net portability was also supported by duty drawback and export rebate received. Given shift in the sales mix, contribution of T-Shirts/Polo segment in export sales has increased considerably followed by Hoodies and Trousers. Previously, undergarments for a major customer used to constitute the bulk of sales. Given the exit of the said customer from the Pakistani market, geographical concentration in sales has reduced. Major export markets include USA, UK and Germany. Given the ongoing & planned capacity and efficiency enhancement projects, net sales are projected to depict strong double digit growth over the rating horizon.

For further information on this rating announcement, please contact the undersigned (Ext: 207) at 021-35311861-70 or fax to 021-35311872.

Javed Callea

Applicable Criteria: Industrial Corporates (May 2016)

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS , the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is not an NRSRO and its credit ratings are not NRSRO credit ratings.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2019 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

VIS Credit Rating Company Limited