PACRA Maintains Entity Ratings of A.J. Textile Mills Limited

The assigned ratings of A.J. Textile Mills Limited ("AJ Textile" or "the Company") draw support from its association with the Aziz Group, which maintains a diversified presence across textile, Real Estate, FMCG, and chip-board production. The Company operates through yarn manufacturing facility with an effective capacity of ~115,000 spindles. The Company's business remains predominantly domestic, with around 95% of sales generated locally, while exports account for around 5%. The current ratings reflect the Company’s improved financial profile, underpinned by stronger profitability, sound liquidity, and a relatively moderate leverage position, alongside the Group’s established and significant presence in the market. During FY26, AJ Textile's revenue remained broadly stable at around PKR 15.2bn, despite a challenging operating environment for the spinning sector. The profitability strengthened, with gross margin improving to ~9.0% (FY25: ~6.0%), while net margin increased to ~4.0% (FY25: ~1.8%). Consequently, profit after tax increased to ~PKR 601mln (FY25: ~PKR 272mln). The improvement reflects better gross profitability and effective cost management, although finance costs and taxes continue to remain a consideration. The Company's financial risk profile remains supported by a sizeable equity base of around PKR 8.3bn and moderate borrowings of ~PKR 3.9bn (FY25: ~PKR 4.2bn). The capital structure consequently improved, with total borrowings constituting around 32% of total capital (FY25: ~35%). Liquidity remains adequate, while debt servicing capacity is supported by sound EBITDA-to-finance cost coverage. Cash generation also improved, with cash generated from operating activities increasing to around PKR 1.7bn, compared to ~PKR 529mln in FY25. Working capital management remained a relative strength, with net working capital days improving, keeping a prudent cycle.
On the strategy side, the Company continues to invest in its operating infrastructure, including renewable energy initiatives. Its 11MW solar energy project supports efforts to manage energy costs, which remain a key structural challenge for Pakistan's spinning industry. Additionally, the Company benefits from access to relatively cost-competitive hydropower through Pakhtunkhwa Energy Development Organization (PEDO)’s hydropower electricity wheeling arrangement, supporting its overall energy cost efficiency. The Company is also evaluating additional energy solutions, including Battery Energy Storage Systems (BESS), to further optimize power utilization and enhance energy reliability. AJ Textile also incurred around PKR 1.2bn in capital expenditure during FY26, reflecting continued investment in its asset base for Balancing, Modernization & Replacement (BMR). The spinning industry continues to face elevated energy costs, dependence on imported cotton, climatic risks to domestic cotton production, and intense competition from regional producers. Working capital requirements also remain structurally high across the sector, while logistical disruptions and higher freight and energy costs can place additional pressure on margins. Nevertheless, declining interest rates and policy measures relating to raw-material imports have provided some relief to sector profitability. Against this backdrop, the Company's improved margins, moderate leverage and stronger cash generation provide some resilience.
The ratings remain dependent on the Company's ability to sustain its improved profitability and cash generation while maintaining prudent financial leverage and working capital management. Continued investment in renewable energy sources, preservation of adequate liquidity and debt servicing capacity will remain important. Further strengthening of the governance framework and alignment of financial performance with projections will also remain relevant to the ratings.

About the Entity
A.J. Textile Mills ("AJ Textile" or "the Company") commenced operations in 1993 as a private limited company. The Company's ownership vests with the sponsoring family, Mr. Afan Aziz (~65%), followed by Mr. Mohsin Aziz (~34%), Ms. Sahiba Imtiaz (~0.7%) and Ms. Huma Mohsin (~0.03%). The Company's Board is chaired by Mr. Mohsin Aziz. While, Mr. Afan Aziz heads the Company as the CEO. They are supported by a team of experienced professionals.