PACRA Maintains Entity Ratings of Shahzad Textile Mills Limited

Shahzad Textile Mills Limited (“Shahzad Textile" or "the Company") has an adequate market presence in specialty yarn, offering a range of products including ring-spun yarn and synthetic blended yarn. The Company manufactures ring-spun cotton and synthetic blended yarns, with a total installed capacity of 70,428 spindles and 187 knitting machines. Over the years, the Company has enhanced its business profile by successfully diversifying into the value-added socks segment. Shahzad Textile remains focused on building long-standing customer relations, both in the local and international markets. During FY25, the Company experienced an increase of ~3.2% in its topline, attributed to both volumetric and value-driven growth. The majority of sales continued to come from yarn, accounting for 87.1% of total revenue, while the socks division contributed 12.9%.
The Company also reported a significant turnaround at the bottom-line, posting a profit of PKR 158mln compared to a loss of PKR 98mln in FY24, underpinned by improved operational efficiency. The Company continues its upward trajectory in 1HFY26, recording a 13.4% increase in topline compared to 6MFY25. During the first half, the Company posted a profit of PKR 125mln, a significant improvement from a loss of PKR 19mln in the same period last year, demonstrating sustained growth momentum and operational resilience. Profitability indicators also improved, with gross margin rising to 8.2% (6MFY25: 5.0%) and net margin turning positive at 2% (6MFY25: -0.3%). Financial risk indicators strengthened, with finance cost coverage increasing to 4.1x (6MFY25: 0.3x) and FCFO rising sharply. The short-term leverage stood at 34.3% (6MFY25: 23.4%), accommodating for a higher working capital requirement. The Company maintains steady growth and a positive momentum heading into the remainder of the financial year.
Pakistan’s textile exports increased to USD ~17.3bln in FY25 (FY24: USD 16.7bln), reflecting a recovery led primarily by value-added segments, including garments and home textiles, while the spinning segment continued to operate under a highly competitive and margin-sensitive environment. The progressive decline in policy rates provided relief to financing costs, improving cash-flow dynamics and offering some cushion to debt-servicing metrics across the sector. In parallel, energy efficiency initiatives, particularly solarization, have emerged as a key structural differentiator, enabling relatively stronger cost positioning and margin resilience for companies with early investments in renewable energy. Overall, industry conditions reflected a gradual shift toward stabilization, with future performance increasingly dependent on product mix optimization, export orientation, energy efficiency, regulatory adaptability, and financial discipline.
The ratings are dependent upon the management's ability to improve the margins, profitability, and financial profile of the Company. This includes avoiding any asset-liability mismatch that may arise and effectively managing its position in a competitive segment. Any further deterioration in debt coverages and/or subdued profitability will have a negative impact on ratings.

About the Entity
Shazad Textile Mills Limited (“Shahzad Textile" or “the Company”) commenced operations in 1979 as a public limited company. Mr. Imran Aslam along with other family members, collectively owns the majority stake (~77.85%) in the Company. The remaining shareholding is held by corporates & related parties (~5.56%), and ~16.59% is held by numerous individuals and institutions. The Board is chaired by Mr. Mian Parvez Aslam. Mr. Imran Aslam heads the Company as the CEO. He is supported by an experienced management team.