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The Pakistan Credit Rating Agency Limited

Date
29-Dec-2017
Analysts
Rai Umar Zafar
rai.umar@pacra.com

Faizan Arif
faizan.sufi@pacra.com

+92-42-35869504
www.pacra.com
Applicable Criteria

  • Corporate Rating Methodology (Jul 17) [View]
  • Correlation between long-term and short-term rating scale (Jun 17) [View]

Related Research

  • Sector Study | Food and Allied (Dec 17) [View]
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PACRA Assigns Initial Entity Ratings of Shabbir Feed Mills (Pvt.) Limited
 Rating Type Entity
Current
(29-Dec-2017)
 Action Initial
 Long Term BBB-
 Short Term A3
 Outlook Stable
 Rating Watch -

The ratings incorporate Shabbir Feed’s strong presence in the southern Punjab in its related fields – poultry feeds, birds and eggs. This is underpinned by strong demand dynamics. The company has lately camped up its capacities and is catching on utilization levels. This along with incentives to production staff and sales channels, are keeping margins under check. However, with achieving stability in production and ensuring efficiencies, margins are likely to benefit. The company is strengthening its marketing team with a whole some mandate: to pursue a market penetration strategy. Shabbir Feed has relatively long working capital cycle due to seasonal nature of inputs that leads to larger holding period, while receivable credit is adequate. The company operates with high leveraging, primarily in the form of short-term borrowings. They are used to fund working capital, advances/financial support to associates, and, to some extent, for fixed assets. Although, cashflows are adequate, given extended leveraging, coverages are constrained. Strong growth in poultry sector amidst improving macro-economic conditions and increasing population is expected to result in robust consumer demand.

The ratings are dependent on the management's ability to build profitable volumes while benefiting from positive demand fundamentals. Financial discipline is crucial; Strengthening of governance framework would be beneficial. The management should consider holding debt driven growth and improving debt mix.
About the Entity
Shabbir Feed Mills (Pvt.) Limited was incorporated in January, 2001. It is part of Shujabad group in existence or over three decades with presence in various sectors including textile, ginning, edible oil and poultry. Shabbir Feed is principally engaged in manufacturing and sale of poultry feed, poultry live birds and table eggs. Annual production capacity of poultry feed is ~252,000mt, poultry live birds ~2,338,000 birds and table eggs of ~ 112,000,000 eggs.

Shareholding structure consist as 75% shares of Shabbir Feed is owned by Mian Shabbir’s family, comprising equal shareholding amongst his five sons. Remaining 25% shares has been owned by Mr. Malik Muhammad Akram. Shabbir Feed’s Board of Directors (BoD) comprises five members, including the Chairman and Chief Executive Officer. Mr. Qaiser Shabbir is the CEO of Shabbir Feed since since inception, assisted by an experienced management team.
The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.
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