Karachi: PACRA has maintained its ‘A+’ long-term and ‘A1’ short-term entity ratings for AGP Limited, citing consistent performance and strategic expansions in Pakistan’s pharmaceutical sector.
According to The Pakistan Credit Rating Agency Limited, AGP Limited operates as both an operating and holding entity within the AGP group, ranking 13th in Pakistan’s pharmaceutical sector by consolidated revenue, the latest IQVIA report. Founded in 1989 and primarily owned by the OBS Group through Aitken Stuart Pakistan (Pvt.) Ltd, AGP has formed strategic alliances with Muller & Phipps Pakistan (Pvt.) Ltd for distribution. The company has historically focused on acute therapeutic segments but is expanding into chronic therapeutic areas through recent brand acquisitions.
During the fiscal year 2024, the pharmaceutical sector saw approximately a 22% year-over-year growth, with total revenues reaching around PKR 918 billion. The top ten companies in the sector now hold about 49% of the market share. AGP has notably achieved a 24.2% growth in its topline for the first half of the year, driven by increased volumes and strategic price adjustments, including contributions from newly acquired brands from Viatris Inc., previously part of Pfizer. This growth has been supported by the Drug Regulatory Authority of Pakistan’s (DRAP) approval of price adjustments and a stabilization in the Pakistani rupee, which is crucial as the industry heavily relies on imported active pharmaceutical ingredients (APIs).
AGP’s ratings are bolstered by strong gross margins maintained over the past three years and significant cash flows that cover debt servicing and working capital needs. However, an increase in finance costs due to higher interest rates and financing for acquisitions has led to a decline in net profit margins. A potential risk for AGP is its reliance on Muller & Phipps Pakistan for 49% of its business, although this is somewhat mitigated by M&P’s stake in AGP.
Looking ahead, AGP’s financial health is expected to improve with the deregulation of prices for Non-Essential Medicines (NEMs), which make up a large part of its portfolio. Additionally, any decrease in interest rates is anticipated to positively affect the bottom line. The future ratings will hinge on AGP’s ability to sustain its growth trajectory and profitability, the adequacy of its cash flows, and adherence to its leveraging metrics.