Stylers International Limited (“the Company” or “SIL”) is a public limited company. During the period under review, the Company obtained Shariah-compliant certification from the Securities and Exchange Commission of Pakistan (“SECP”), reflecting compliance with the Shariah-related requirements.

SIL was incorporated as a private limited Company under the repealed Companies Ordinance 1984 (now the Companies Act 2017) on November 27, 1991. During the BOD meeting held on June 07, 2023, the BOD approved the Scheme of Arrangement for the merger of AEL Textile Limited with Stylers International Limited. After filing the requisite documents with the PSX, the shares of SIL were listed on the PSX on January 22, 2024.

The Company is engaged in the manufacturing and marketing of ready-made garments, as well as providing textile processing services. Its registered office is located at 20 km Ferozepur Road, Anum Road, Glaxo Town, Lahore, Punjab. The Company operates two manufacturing facilities in Lahore: one at 20 km, Glaxo Town, Ferozepur Road; and another at Village Bhuchoki Mahja, Tehsil Raiwind, Raiwind Road. Collectively, these facilities achieved an estimated annual production capacity of approximately 10.52 million pieces in FY26, based on a 296 working-day calendar.

SIL is a prominent business venture of two sponsoring families (Mr. Mian Muhammad Ahsan & Mr. Javed Arshad Bhatti) of the US (Umer Siddique) Group. The Company’s major stake is owned by sponsors through Individual Holdings (69.70%) and Associate Companies (29.60%). While the remaining stake rests with the General public (0.54%) and Others (0.16%).

The Company has a family constitution in place, which serves as a guiding framework for governance, succession planning, and conflict resolution within the family business. This constitution outlines a formal and transparent succession plan, ensuring a smooth transition of leadership across generations. The second generation is already actively engaged in the business, holding key managerial and strategic roles, which reinforces continuity within the organization. The ownership structure remains clearly defined and consolidated within the family. This stability in ownership and leadership ensures sustained strategic direction and positions the Company for continued growth in future.

US Group stands as Pakistan’s leading exporter of denim and twill fabrics, backed by decades of experience and a strong legacy in the textile sector. The Group’s deep-rooted expertise, coupled with a commitment to innovation and quality, has enabled it to maintain a dominant position in the market. Over the years, US Group grappled with several economic cycles but the growth and operational excellence remained intact. In SIL, the strategic oversight is provided by Mr. Muhammad Umer and Mr. Muhammad Saqib, who serve as directors. Both individuals bring valuable insight and experience, contributing to SIL’s alignment with the Group’s broader vision and long-term objectives.

Sponsor's financial capacity is derived from the wider US Group, which was estimated at USD 356mln in size as per the Group's CY23 sustainability disclosure, comprising three further textile companies alongside SIL, namely US Apparel & Textile, US Denim, and US Dyeing & Finishing. This vertically aligned Group presence across fabric, apparel and processing provides both operational and financial depth. Also, the sponsors have historically evidenced willingness to support the Company through interest free director funding and Musharakah participation.

The Board comprises seven members, including six male directors and one female director, with the CEO forming part of the Board. The composition includes two non-executive directors, two independent directors, and three executive directors including the CEO, indicating a sound governance structure. The Board is chaired by Mr. Javed Arshad Bhatti.

The Board of Directors (BoD) comprises members with diverse professional backgrounds, extensive industry experience, and the requisite skills and competencies to support the Company’s strategic direction and sustainable growth.

The Board benefits from the longstanding experience of the US Group’s founders, Mr. Javed Arshad Bhatti, Chairman of the Board, and Mr. Mian Muhammad Ahsan, Non-Executive Director, both of whom have been associated with the business since 1975. Their extensive involvement in the Group provides valuable insight into its operations, business strategy, and long-term development.

Furthermore, Mr. Muhammad Umer and Mr. Muhammad Saqib each possess approximately two decades of experience in the textile industry, contributing sector-specific expertise. The Board also includes Ms. Samar Masood Soofi, a lawyer by profession, and Mr. Syed Muhammad Irfan Aqueel as Independent Directors, bringing complementary professional perspectives to Board deliberations.

To ensure compliance with regulatory requirements, the Company has established three board committees to assist the board on operational and strategic matters. The Audit Committee is chaired by Mr. Syed Muhammad Irfan Aqueel, while the Human Resource & Remuneration Committee and the Sustainability Committee are chaired by Ms. Samar Masood Soofi.

In FY26, four Board of Directors (BOD) meetings were convened to evaluate the Company’s overall performance and progress toward its targets. Attendance by BOD members remained strong during these meetings, reflecting their commitment to the Company’s growth. Furthermore, four meetings of the Audit Committee and one meeting of Human Resource & Remuneration Committee and Sustainability Committee were held. The minutes of the meetings have been formally documented.

BDO Ebrahim & Co., Chartered Accountants, have been appointed as the external auditors of the Company. They are rated in "Category A" by the SBP panel of auditors, aligning with the high standards of transparency. The auditors expressed an unqualified opinion on the financial statements of the Company for the period ended June 30, 2026.

The Company has an internal audit function in place, which reviews the internal control environment and provides independent assurance on the effectiveness of risk management. The internal audit department conducts both regular and ad hoc reviews of risk management controls and procedures, with the results reported to the Audit Committee.

The Company has a well-defined organizational structure comprising key functional departments: Finance, Marketing, Technical Production, Supply Chain, Information Technology, and Human Resources & Administration. Each department reports directly to the Chief Executive Officer (CEO)/Managing Director, ensuring centralized oversight, effective coordination, and streamlined communication across the organization. This reporting framework facilitates efficient decision-making, clear accountability, and alignment of departmental activities with the Company’s overall strategic objectives.

The Company’s senior management is led by the CEO, Mr. Hafiz Mustansar Ahmed, who holds a Master’s degree in Business Administration and brings more than 25 years of experience in the textile sector. His extensive industry experience provides valuable insight into business operations, strategic planning, and sector dynamics.

The finance function is headed by the CFO, Mr. Sharjeel, a Fellow Chartered Accountant with several years of professional experience. He is supported by a team of highly qualified and experienced professionals, ensuring adequate financial oversight and support for the Company’s financial management and reporting requirements.

The Company has no formal management committees in place; however, management meetings are held on a monthly basis. These meetings, led by the Chief Executive Officer, include follow-up points to resolve or proactively address any operational issues, ensuring a smooth flow of operations.

The Company’s daily and monthly MIS comprises comprehensive performance reports which are reviewed frequently by senior management. Recognizing the need for quality information systems to control and maintain the efficiency of operations, the Company has implemented an Oracle-based ERP solution - Oracle E-business Suite, Harmony version 12.2.11, along with an internal web and mobile portal for internal approvals and reporting.

The Company employs a two-pronged approach to control assurance, supported by established management systems and external audits and certifications. The Company has obtained several internationally recognized certifications and compliance accreditations, demonstrating its focus on quality management, environmental sustainability, occupational health and safety, supply chain security, and adherence to social and industry-specific standards. These include C-TPAT, WRAP, SMETA (SEDEX), amfori BSCI, ISO 9001:2015, ISO 14001:2015, ISO 45001:2018, OEKO-TEX, REACH, GOTS, OCS, GRS, RCS, Higg Index (FEM), ZDHC, and BCI.

Textiles remain the structural backbone of Pakistan's external account and the country's largest manufacturing export earner, but the sector has moved into a phase of volume maturity at the aggregate level while continuing to shift composition towards value added products. Textile exports edged up 0.26% in FY26 to USD 17.93bln from USD 17.88bln a year earlier on provisional national statistics, and on the industry body's measure textile and apparel exports reached USD 18bln in FY26, a 0.3% increase, even as total national exports fell 5.9% to USD 30.14bln, leaving textiles at roughly 60% of national exports. The compositional shift is the more informative signal: value added exports under Chapters 61 to 63 rose 1.1% to USD 14.98bln and their share of textile exports climbed to 83.2% from 77% in FY22, while raw material and intermediate exports under Chapters 50 to 60 declined 3.4% to USD 3.026bln, the lowest in five years against USD 4.498bln in FY22. Within the value added block, garments outperformed: non knit apparel exports grew 3.9% to USD 4.295bln while knitwear slipped 0.7% to USD 4.979bln and home textiles rose 0.6% to USD 5.705bln, and readymade garment exports set a record at USD 4.18bln in FY26 on 5.5% growth, having more than doubled from USD 1.97bln in FY15 and 16. Internationally, Pakistan competes with Bangladesh, Vietnam, India and increasingly Central Asian suppliers in a buyer led global apparel market where order allocation is driven by price, lead time and compliance credentials. Local risk diverges from the global norm in one critical respect, which is raw material security. The official cotton estimate for 2025 and 26 was 7.05mln bales while ginners recorded arrivals of ~5.6mln bales, and production for 2026 and 27 is estimated at 6.71mln bales against a 9.64mln bale target, a 30% shortfall and the sixth consecutive miss. Domestic supply now covers barely half of industry requirement, with imports projected to meet close to half of mill needs, and Pakistan spent USD 2.69bln on raw cotton imports in 2024 and 25 and USD 1.53bln in 2025 and 26. The current season shows tentative stabilisation, with arrivals up 7.53% year on year to 4.08mln bales by October 15, 2026, supported by dry weather and relatively favourable domestic prices, although industry representatives continue to describe a deepening crisis with factory closures. Barriers to entry differ sharply by sub segment: spinning and weaving are capital intensive and commoditised, whereas garmenting carries lower capital thresholds but high non financial barriers in the form of buyer audits, certification regimes and relationship tenure, which favours incumbents with established compliance records. Supplier power has risen with import dependence on cotton and man made fibre, while customer power is structurally high given concentrated global retail buying. The sector is cyclical across all three relevant dimensions, being sensitive to discretionary consumer demand in Europe and North America, to seasonal order cycles around spring and autumn collections, and to cotton and synthetic fibre price movements that are set internationally. Capacity utilisation remains uneven, with one leading listed denim operator running at around 65 to 66% utilisation on a 12mln piece capacity in FY26, which suggests meaningful idle capacity in the garmenting segment and limits pricing power. Policy risk has been the dominant variable of the current cycle. The regulator and policy architecture sits with the Federal Board of Revenue and the Ministry of Commerce, with the Export Facilitation Scheme as the central framework, and eligible exporters import inputs and capital goods free of customs duty, sales tax, federal excise duty and applicable withholding taxes against export obligations. Two developments are material. First, raw cotton, cotton yarn and grey cloth were removed from the scheme in 2025 through SRO 1359(I)/2025, forcing exporters to pay taxes upfront on affected inputs and increasing liquidity pressure and production costs, with further proposed exclusions across Chapters 52 and 55 threatening to raise input costs and tie up working capital. Second, on the fiscal side, the Super Tax was abolished for companies earning more than 80% of revenue from exports under the Finance Bill 2026, a direct relief for export concentrated manufacturers, although the earlier shift of exporters from the final tax regime to the minimum tax regime continues to weigh on competitiveness and the industry continues to press for restoration of the final tax regime and clearance of over PKR 327bln in pending refunds. Energy remains a structural cost disadvantage, with electricity at 14 to 16 cents per kWh and gas at USD 12 per MMBTU against 5 to 7 cents and USD 3.8 to 5 per MMBTU in competing supplier economies. The principal endemic credit risks for the sector are therefore raw material availability and price volatility combined with import dependence, policy and taxation instability affecting cash flows and refund cycles, energy cost uncompetitiveness, working capital intensity magnified by delayed refunds, and concentration of demand in a narrow set of Western buyers exposed to discretionary spending cycles. On ESG and technology, buyer mandated environmental and social compliance has moved from differentiator to minimum qualification, with chemical management, water usage, renewable energy adoption and traceability now embedded in sourcing decisions, while automation in cutting, sewing support and dyehouse control is gradually raising the capital intensity of competitive garmenting.

SIL has a strong relative positioning with an overall production capacity of ~10.5 million pieces per annum and it falls in the mid-tier of the respective industry.

The Company’s revenue profile is predominantly export-oriented, reflecting its established presence in international markets. Over the three-year period from FY24 to FY26, the Company’s topline recorded a compound annual growth rate (CAGR) of 7.0%, reaching PKR 18.8bln in FY26. The growth trajectory was supported by an expansion in business volumes, underpinned by higher demand and enhanced production capacity. The Company demonstrated resilience amid prevailing business challenges, indicating the strength of its underlying business fundamentals.

During FY26, the Company’s topline stood at PKR 18.8bln, compared to PKR 20.8bln in FY25. Export sales remained the primary revenue contributor, accounting for approximately 96.2% of total revenue, while domestic sales contributed a relatively modest PKR 197mln, compared to PKR 292mln in FY25. Despite the Company’s established international market presence, its export base remains geographically concentrated in Europe, exposing it to regional economic conditions, changes in consumer demand, trade policies, and other market-specific risks.

Furthermore, the concentration of sales among the top ten customers remains elevated, increasing the Company’s exposure to changes in the purchasing patterns or financial standing of key customers. Nevertheless, longstanding relationships with leading international clientele provides comfort in terms of business continuity and revenue visibility. Going forward, sustaining key customers, diversification of geographical presence and customer base will remain important considerations for maintaining revenue stability.

In FY26, the Company’s gross profit margin improved to 18.8% (FY25: 18.4%), reflecting a modest improvement in overall cost absorption despite prevailing operational challenges. The operating profit margin also strengthened to 11.4% (FY25: 10.7%), indicating improved operating profitability. Accordingly, the PBIT margin increased to 11.2% (FY25: 11.0%). However, the net profit margin moderated slightly to 5.9% (FY25: 6.1%), primarily reflecting a higher effective tax rate alongside an increase in finance costs relative to revenue, with the finance cost-to-sales ratio rising to 0.7% (FY25: 0.5%). Non-operating income contributed PKR 226mln to PBIT in FY26, compared to PKR 274mln in FY25, supplementing the profitability.

To clinch the future demand of the denim industry, SIL's "Sunshine" project is in its final stages of completion and is expected to be fully operational by end of FY27, with a project cost of ~ PKR 10bln; financed through the right issue and internally generated cashflows. This unit is expected to achieve the target capacity of ~6mln pieces (subject to market demand and final commissioning). SIL has also invested in the green energy sources to mitigate the energy cost risk and reduce emission. The Company successfully coverted its steam generation to biomass across both plants from fossil fuels. Additionally, the Company achieved substantial reduction in water usage through optimization, reuse, rainwater harvesting, and conservation initiatives. SIL also contributed 5,000 saplings to the Parks & Horticulture Authority (PHA) to support urban greening in Lahore.

The Company’s working capital requirements are supported by internally generated cash flows. During FY26, the net working capital cycle remained stable at 43 days, in line with FY25. However, the gross working capital cycle increased to 80 days (FY25: 73 days), primarily due to a lengthening of the inventory holding period to 46 days (FY25: 37 days), particularly in work-in-process inventory, which increased to 27 days from 20 days. The inventory cycle for raw materials remained unchanged at 10 days, while finished goods inventory increased to 10 days (FY25: 7 days). This was partly offset by an improvement in the trade receivables cycle to 34 days (FY25: 36 days). Meanwhile, the trade payables cycle extended to 37 days (FY25: 30 days), helping offset the increase in gross working capital requirements. Short-term trade leverage remained in a moderate range exhibiting less reliance on short-term external funding.

The Company continued to demonstrate a strong debt-servicing capacity, supported by healthy operating cash flows and a low debt burden. Free cash flow from operations (FCFO) remained broadly stable, increasing marginally by to PKR 2.1bln in FY26. EBITDA-to-finance cost coverage stood at a comfortable 24.3x (FY25: 27.5x), while FCFO-to-finance cost coverage moderated to 16.9x (FY25: 20.3x). Debt payback remained stable at 0.8 years, reflecting the Company’s strong capacity to repay its borrowings through internally generated cash flows. Overall, despite a marginal moderation in certain coverage indicators, the Company’s debt-servicing capacity remains strong, underpinned by robust cash flow generation and limited financial leverage.

The Company maintains a conservative capital structure, with limited reliance on external borrowings. As of end-FY26, the leverage ratio declined to 9.9% from 10.3% in FY25, reflecting a further strengthening of the Company’s capitalization profile. The borrowing mix remained entirely free of short-term borrowings, with short-term borrowings accounting for 0.0% of total borrowings in both periods. This indicates limited dependence on short-term debt and reduces exposure to refinancing and rollover risks. The Company’s low-leveraged capital structure, together with strong internal cash generation and healthy debt coverage indicators, provides financial flexibility to support ongoing operations and future business requirements.