Shahzad Textile Mills Limited ('Shahzad Textile' and 'the Company') is a public listed company incorporated in 1978 under the Companies Ordinance 1984 (now called the Companies Act 2017).

Late Mian M. Aslam entered the business arena by setting up spinning units and a jute mill. M. Aslam also held stakes in textile and other ventures operating under the umbrella of Sargodha Group. Later, as the ownership split, Shahzad Textile, Shaheen Cotton (which was later merged with and into the Company), and Sagodha Jute Mills were handed over to Mian Parvez Aslam and passed on to his son (third generation), Mian Imran Aslam.

The Company operates three spinning units with a current capacity of 70,428 spindles. Unit #1 focuses on PV yarn, while Unit #2 produces polyester cotton yarn. Unit #3 has been replaced with a sock manufacturing unit housing 197 knitting machines. The Company requires ~4.7MW of energy, which is met through a mix of ~8.9MW of renewable (solar) and LESCO's connection (sanctioned limit: 7.2MW). The Company's registered office is situated at Off Zafar Ali Road, Gulberg, Lahore. Three units of the manufacturing facilities are situated in Lahore-Sheikhupura Road, Sheikhupura; while one unit of manufacturing facility is situated in Sheikhupura-Faisalabad Road, Kharianwala.

Mr. Imran Aslam along with other family members owns the majority (~77.85%) stake in the Company. ~5.56% of the shareholding in the Company is held by corporates. The remaining ~16.59% is distributed among local and foreign investors and institutions.

The fourth generation of the Aslam family has joined the business. Although there is no formal succession plan but the shareholding and operational roles are equally divided among the family members of Mr. Imran Aslam and Mr. Irfan Aslam.

The sponsors hold decades of related experience and have witnessed numerous business cycles. This bodes well for the overall decision-making process for the Company.

Mr. Imran Aslam holds ~28% shareholding in Sargodha Jute Mills Limited. Other than that, on a personal level, he is an active investor in real estate and the stock market. This portrays adequate financial muscles of sponsors to support the Company, if needed.

The overall control of the Company vests in a seven-member Board. The Board comprises two Executive Directors, three Non-Executive Directors, and two Independent Directors, including a Female Director. The Board holds independence and gender diversity that benefits the decision making process.

Mian Parvez Aslam, the Chairman, carries with him over four decades of experience and has been associated with the Board since inception. He looks after the policies and other operational issues of the Company and guides his valuable experience in times of need.

The Board is assissted by two committees: Audit and HR & Remuneration Committee (HR&R). The Audit Committee meets quarterly to approve financial statements prior to Board meetings. HR&R meets at least once in a financial year and may meet more often if requested by the Board. Meanwhile, the Director's attendance has remained strong and meeting minutes have been formally recorded.

The External Auditors of the Company, M/S. Crowe Hussain Chaudhury & Co., Chartered Accountants, an 'A' category QCR-rated firm, has expressed an unqualified opinion on financial statements for the period ended FY25.

The Company's organizational structure is divided into two main divisions: Head Office and Mills. All departmental Heads report directly to the CEO, who then reports to the BoD. However, the Head of Internal Audit and HR reports administratively to the CEO and functionally to the respective Board Committee.

Mr. Imran Aslam heads the Company as the CEO. He is supported by a team of experienced professionals, including Mr. Imran Haider, who is the CFO of the Company. Mr. Imran Haider has been associated with the Company for almost a decade, while having an overall two decades of experience. The senior management has over a decade of relevant experience with a long association with the Company.

Management's decision-making process is managed through monthly meetings of all departmental Heads. Performance reviews of all units are conducted during these discussions. However. there is no formal management committee in place.

The Company has in place oracle Oracle-based local ERP system by the name of Wizmen. The Company maintains adequate IT infrastructure and related controls.

The Company places emphasis on the sustainable quality of yarn. For this, it is compliant with the latest version of ISO 9001-2008 Certification. The Company has placed an in-house internal audit funtion to monitor the policy formation and implementation process. This bodes well for the Company

Pakistan’s textile exports reached USD 16.7 billion in FY24, marking a modest increase of 0.93% YoY from USD 16.5 billion in FY23. The largest contribution came from the composite and garments segment at USD 9.1 billion, followed by the weaving segment at USD 6.5 billion and the spinning segment at USD 1.0 billion. During 5MFY25, textile exports stood at USD 7.6 billion, indicating steady momentum despite global market challenges. The sector continues to face profitability pressures, particularly due to the transition from the final tax regime to the normal tax regime in FY25, which introduces a 29% tax on profits along with a super tax of up to 10%, potentially affecting export-oriented units. Input costs, particularly for imported cotton, remain a concern, though the gradual decline in policy rates over the last two quarters, coupled with expectations of further reductions, is expected to ease financing costs and provide relief to the industry’s financial metrics. Sustainable growth in textile exports will depend on enhancing value-added production, improving domestic cotton availability, and maintaining competitive pricing in key international markets, while effectively managing taxation and operational costs.

During FY25, the Company’s yarn production capacity remained stable, with 51,312 spindles installed, the same as FY24. However, operational spindles declined to ~12,056 (FY24: ~19,900), reflecting underutilization of available capacity. When converted to 20s on three shifts per day, the plant’s total capacity remained at ~19,346,188 Kgs, while actual production declined to ~2,087,980 Kgs (FY24: ~3,236,147 Kgs). The lower production during FY25 was primarily attributable to weak demand and the temporary closure of the Company’s Spinning Unit-I. Consequently, despite maintaining full installed capacity, utilization rates fell significantly, highlighting limited operational throughput relative to potential capacity.

During FY25, the Company’s revenue grew modestly by approximately 3.2% to PKR 11,371 million (FY24: PKR 11,015 million), reflecting stable sales performance amid prevailing industry conditions, with the majority of sales (~97%) derived from yarn. The growth was primarily supported by higher export proceeds, with export sales rising by ~30.1% to ~PKR 1,436mln compared to ~PKR 1,104mln in FY24, indicating improved penetration in international markets. During 1QFY26, the Company recorded a significant increase in revenue of ~50.6%, reaching ~PKR 3,355mln compared to ~PKR 2,227mln in 1QFY25. The substantial growth during the quarter signals strengthened demand and improved sales momentum at the start of the financial year.

During FY25, the Company demonstrated a marked improvement in its profitability profile, with the gross profit margin increasing to ~6.1% from ~4.7% in FY24, primarily driven by improved cost efficiencies and better absorption of production overheads. This translated into an enhanced operating margin of ~1.7% compared to ~0.8% in the preceding year. The trickle-down effect of improved operational performance led to a positive net margin of ~1.9% in FY25, reflecting a turnaround from the negative net margin of ~-0.9% recorded in FY24. During 1QFY26, the upward trajectory continued as the gross margin rose to ~8.4% from ~5.2% in 1QFY25, supported by improved pricing and cost management. Consequently, the Company reported a net margin of ~2.0% during 1QFY26, compared to a negative net margin of ~-1.3% in 1QFY25, indicating sustained strengthening in overall profitability.

The Company is focused on strengthening sustainability and competitiveness through strategic investments in technology, process optimization, and market diversification, enhancing its presence in domestic and export markets. Efforts to improve cotton sourcing, upgrade facilities, and produce certified yarns using recycled and synthetic fibers aim to ensure cost efficiency, consistent product quality, and operational efficiency. Additionally, the Company is proactively seeking financing to mitigate high interest rates and cash flow challenges, while expanding its supplier base and exploring international markets. These initiatives support long-term growth, profitability, and value creation for stakeholders.

The Company continues to meet its working capital requirements primarily through internally generated cash flows and short-term borrowings. As of FY25, the net working capital cycle slightly improved to ~27 days (FY24: ~28 days). The marginal improvement was mainly supported by a reduction in trade receivable days to ~8 days from ~9 days in FY24, reflecting relatively efficient receivables management. However, inventory days increased to ~26 days (FY24: ~24 days), indicating slightly higher inventory holding levels, while trade payable days increased to ~6 days from ~5 days in the preceding year, providing additional supplier credit support. Furthermore, the Company’s short-term trade leverage declined to ~43.4% from ~44.7% in FY24, indicating a relatively lower reliance on short-term borrowings to finance trade assets. Overall, the working capital indicators reflect stable and prudent management of operational liquidity.

In FY25, the Company’s FCFO improved significantly to ~PKR 230mln (FY24: ~PKR 62mln), primarily attributable to enhanced operating performance and stronger profitability. Consequently, the interest coverage ratio strengthened to ~4.0x (FY24: ~1.7x), reflecting improved debt servicing capacity on the back of higher cash flow generation. The Company’s debt coverage also improved markedly to ~2.7x compared to ~-3.4x in FY24, indicating a substantial enhancement in its overall financial risk profile. As of 1QFY26, the FCFO of the Company increased to ~PKR 138mln (1QFY25: ~PKR 41mln), attributable to improved earnings generation during the period. Accordingly, the interest coverage ratio improved to ~8.5x (1QFY25: ~1.7x). However, the debt coverage ratio moderated to ~0.8x compared to ~9.9x in 1QFY25, reflecting quarterly variations in debt levels and repayment dynamics.

In FY25, the Company maintained a low-leveraged capital structure, with total borrowings declining slightly to ~PKR 878mln (FY24: ~PKR 893mln) while equity increased to ~PKR 3,533mln (FY24: ~PKR 3,327mln), primarily reflecting retained earnings and revaluation gains. Consequently, the debt-to-capital ratio improved to ~19.9% compared to ~21.2% in FY24, indicating a stronger equity base relative to debt. As of 1QFY26, total borrowings increased to ~PKR 1,129mln (1QFY25: ~PKR 1,011mln), while equity strengthened further to ~PKR 3,599mln (1QFY25: ~PKR 3,298mln). This resulted in a relatively stable leverage position, reflecting the Company’s prudent capital management and sustained focus on maintaining a low-leverage financial profile