Zahidjee Textile Mills Limited ("ZTML" or "the Company") is a public limited Company, incorporated on July 17, 1990. It is listed on the Pakistan Stock Exchange Limited.

Mr. Muhammad Sharif, the former Chairman of ZTML, acquired the listed spinning company Ihsan Yousuf Textile Limited from Allied Bank Limited. The Company was later renamed Zahidjee Textile Mills Limited. Over the years, it was strategically expanded and achieved vertical integration through the installation of additional spindles and the addition of a weaving unit.

The Company’s operational infrastructure comprises 150,084 spindles and 262 shutterless looms. It is engaged in the manufacture and sale of yarn and fabric, while also exporting a diverse range of value-added products. The registered office of the Company is situated at 131-A, Street P, Upper Mall Scheme, Lahore.The weaving unit is located at 32 KM, Tandlianwala Road, Satyana, District Faisalabad, while the two spinning units are situated at 32 KM, Sheikhupura Road, Faisalabad, and in the M-3 Industrial Estate, Faisalabad, within the province of Punjab. The Company operates with a total energy requirement of 17 megawatts (MW).

The majority stake in the Company (~96.6%) is held by the sponsors, Mr. Ahmad Zahid (~75.0%) and Mr. Muhammad Zahid (~21.6%). The remaining stake is held by the general public (~2.1%) and others (~1.3%).

The Company’s ownership is expected to remain stable in the foreseeable future, as evidenced by the smooth transfer of majority shares to Mr. Ahmad Zahid. Although a formal succession plan is not currently in place, it has been decided that Mr. Ahmad Zahid will serve as the successor, holding the largest shareholding in the Company.

The sponsoring family possesses over four decades of extensive experience in textile manufacturing and trading. Their deep-rooted expertise has enabled them to maintain growth through various economic cycles. In addition to their textile venture (ZTML), the family also has an ownership interest in Invest Capital Investment Bank Limited.

Apart from ZTML, the sponsors own several real estate properties (non-operating land) in Raja Bolay, Tehsil Cantt, and Deve Khurd Kalan, Tehsil Model Town, District Lahore. They sponsors have expressed their willingness to support the Company, if needed.

The seven-member board comprises six male directors and one female director. It includes four independent directors, two executive directors, and one non-executive director, reflecting a sound governance framework.

The Chairman, Mr. Ahmad Zahid, graduated from Babson College, USA. He has been associated with ZTML for the last two years. Mrs. Mehreen Fahad attended the Lahore School of Economics and serves as a director on the board of ZTML. Mr. Muhammad Ali has over 24 years of experience, previously serving as the CEO of Engro Vopak Terminal. Mr. Shahbaz Haider Agha, an executive MBA graduate from NCB&E, Lahore, has 24 years of experience in the insurance industry and is serving as the CEO of Hellenic Sun Insurance Brokers (Pvt.) Limited. Mr. Sajjad Hussain Shah, a qualified CA, brings with him over 28 years of experience in the textile sector. Mr. Faisal Masood, a fellow member of ICAP, brings more than 20 years of diverse experience.

To uphold high standards of governance and transparency, the Company has four board committees in place: the Audit Committee, chaired by Mr. Sajjad Hussain Shah; the HR & Remuneration Committee, chaired by Mr. Shahbaz Haider Agha; the Risk Management Committee, chaired by Mr. Faisal Masood Afzal; and the Nomination Committee, chaired by Mr. Muhammad Zahid. During FY25, four Board of Directors meetings were held, along with two Audit Committee meetings and one HR & Remuneration Committee meeting. The attendance of all members remained strong, reflecting the members active engagement and commitment to effective governance. The minutes of BOD meetings have been formally documented.

RSM Avais Hyder Liaquat Nauman & Co., Chartered Accountants, are the external auditors of the Company, placed in category "A" by the SBP's panel of auditors. The auditors expressed an unqualified opinion on the Company’s financial statements for the year ended June 30, 2025. ZTML has an in-house internal audit department consisting of two members who report directly to the CEO, with monthly and quarterly reporting.

The Company's lean organizational structure accelerates the decision-making process and reduces execution time. The CFO, along with the heads of production and marketing, reports directly to the CEO. The HR and IT departments report to the CFO.

The CEO, Mr. Muhammad Zahid, holds a graduate degree and has 35 years of experience in the textile sector. He is actively involved in the company's day-to-day operations. The CFO, Mr. Shahab Ud Din is supported by a team of highly qualified and seasoned professionals.

There are no formal management committees in place, and all unit heads report to the CEO daily to discuss day-to-day business developments and operational issues. This reflects an adequate delegation of authority matrix.

The Company deployed an Oracle-based ERP solution, Oracle EBS, in 2012, which provides an integrated and automated approach to managing business processes. This allows the Company to streamline and consolidate the flow of information from dispersed operations, enabling proactive management, the avoidance of disruptions, and timely decision-making.

Through MIS, the Company is also able to monitor working capital management and exposure to related parties with automated limits and periodic reviews. The Company holds Oeko-Tex certification, which certifies that its end products and all their components are non-hazardous.

During MY25, approximately 24.4 million MT of cotton was produced globally, compared to about 24.2 million MT in MY24. Throughout the year, low cotton production was observed in India and Pakistan. However, this was partly offset by increases in cotton production in China, the United States, and Brazil by roughly 9.7%, 19.4%, and 15.7%, respectively. China remains the largest producer and consumer of cotton worldwide (MY21-25). Pakistan's cotton output declined by approximately 30.7%, due to reduced cultivation area and a surge in duty-free imports of cotton and yarn, which disrupted domestic markets. Conversely, cotton imports increased by around 234.0% YoY during the same period to satisfy domestic demand (FY24: roughly 70.0% YoY decline). Cotton arrivals for FY24-25 totaled about 5.5 million bales. The target for cotton production in FY26 is set at approximately 10.2 million bales. The sector's rising dependence on imported cotton poses a supply-side risk. For FY25, imports accounted for approximately 35% of the cotton supply (~11% in FY24), adding about USD 1.27 billion (USD 448 million in FY24) to the country's import bill. Textile exports reached USD 17.9 billion in FY25, a modest rise from USD 16.7 billion the previous year, reflecting a 7.2% year-over-year growth. The largest contribution came from the composite and garments segment, at USD 14 billion, which included the weaving segment at USD 1.8 billion and the spinning segment at USD 0.7 billion. The production of cotton cloth in FY25 declined by approximately 0.7% year over year, reaching around 877.1 million square meters. During FY25, about 25.3% of the cotton cloth produced was exported (compared to roughly 27.2% in FY24), with the rest used for the domestic market. The country's fabric exports fell by approximately 4.4% in FY25 (FY24: up about 5.8% YoY), with approximately 23.4% of Pakistan's cotton cloth exports going to Bangladesh (compared to about 19.9% in FY24), followed by the USA with about 8.1% of cotton cloth exports (compared to approximately 7.8% in FY24). In FY25, the transition from the final tax regime to the normal tax regime is expected to affect the profitability of export-oriented units, with a 29% tax on profits and a super tax of up to 10%. The recent removal of GST exemption (Finance Bill, 2025) on textile inputs for exporters registered under the Export Facilitation Scheme (EFS) will offer tax protection and create a level playing field for domestic cotton and yarn producers. Currently, international cotton prices are higher than the price of locally produced cotton. The gap has widened to approximately 9.8 cents per pound (as of July 18, 2025), resulting in an average increase of about USD 36.8 per bale of imported cotton. A greater reliance on imported cotton could lead to higher raw material costs, ultimately impacting yarn prices and profit margins for the sector. Conversely, energy and finance costs are expected to stay within a range, given the projected reduction in interest rates and the absence of any major energy tariff increases. Considering the current climate change, flooding in major cotton regions, and shifting crop patterns, the target of approximately 10.2 million bales for FY26 appears challenging.

With a total production capacity of 150,084 spindles, 262 looms, the Company falls in the mid-tier of the respective universe.

The Company's revenue stream is predominantly driven by domestic sales. The Company's topline experienced a progression with a 3-year CAGR of 13.4% from 2023 to 2025. This was driven by a steady volumetric growth, translating into continuous revenue expansion. In FY25, the Company's topline reached PKR 40.6bln (FY24: PKR 37.7bln), indicating a 7.6% year-on-year growth. This resulted from the continuous increase in the sales volume of yarn along with adequate product pricing. Product-wise analysis indicates that yarn contributed approximately 84.5% to the Company’s top line, followed by made-ups and other products. The Company exports to North America, South America, Europe, and Africa, reflecting a low geographic concentration risk. The local customers include Style Textile Mills Limited, Nishat Mills Limited, Sapphire Fibres Limited and a few others. Although the top 10 clients in the local market account for a slightly elevated share of revenues, however, the long-standing relationships with prominent industry players provides comfort.

The Company's gross profit margin reflected an improvement at 6.6% (FY24: 4.9%). This is mainly due to the procurement of cotton at reasonable price along with adequate product pricing. The operating expenses increased further in line with the inflationary trends. The Company earned a healthy revenue from the money market investments and monetary easing. Interest income from TDRs provided a cushion to the profitability matrix. Resultantly, the Company's bottom line exhibited a sizeable improvement at PKR 1.4bln (FY24: PKR 635mln), with the net profit margin of 3.7% (FY24: 1.7%).

The Company has already achieved its targeted production capacity through phased expansion during the previous years. Further, the Company is investing in solar project as a renewable energy alternative.

The Company’s working capital requirements are primarily influenced by its inventory cycle and trade receivable cycles, which are financed through a combination of internally generated cash flows and short-term borrowings. As of FY25, the Company’s net working capital cycle remained stable at 68 days (FY24: 67 days), despite elongated inventory holding period of 49 days (FY24: 40 days). The Company retains sufficient borrowing capacity, as reflected in a short-term trade leverage ratio of 36.6% (FY24: 45.7%). Furthermore, it continues to demonstrate a strong liquidity position, with a current ratio of 3.9x (FY24: 3.6x).

The Company’s operational performance improved on the back of a significant increase in EBITDA. Consequently, the free cash flow from operations (FCFO) increased to PKR 3.1bln (FY24: PKR 1.9bln). This improvement translated into stronger interest coverage and core operating coverage ratios, which stood at 3.4x (FY24: 1.6x) and 1.5x (FY24: 0.8x), respectively. The rise in FCFO, combined with a decline in finance costs, contributed to a substantial reduction in the debt payback period, which improved to 1.7 years (FY24: 11.2 years).

The Company’s debt portfolio consists of a combination of conventional borrowings and concessionary financing schemes extended by the State Bank of Pakistan (SBP). In FY25, the Company’s total leverage declined to 29.7% (FY24: 34.5%), reflecting a moderately leveraged capital structure. The Company’s equity base further strengthened to PKR 20.8bln (FY24: PKR 16.0bln), supported by the retention of earnings from prior years.