AGP Limited (PSX: AGP) was incorporated in Pakistan as a public limited company in 2014. The company is engaged in the import, export, marketing, distribution, dealership, and manufacturing of a wide array of pharmaceutical products. Aitkenstuart Pakistan (Private) Limited is the ultimate parent company of AGP. AGP distributes its products through Muller & Phipps Pakistan (Private) Limited which has access to over 46,000 pharmacies across Pakistan.

Pattern of Shareholding

As of December 31, 2023, AGP has a total of 280 million shares outstanding which are held by 3250 shareholders. Aitkenstuart Pakistan (Private) Limited holds 55.8 percent shares of AGP. Collectively, associated companies, undertakings, and related parties hold 74.13 percent shares of AGP. Banks, DFIs, NBFIs, Insurance, Takaful, Modarba, and pension funds have a stake of 4.94 percent in AGP. Foreign companies hold 2.01 percent shares of the company while local general public accounts for 2.42 percent of the outstanding share capital of AGP. The remaining shares are held by other categories of shareholders.

Historical Performance (2019-23)

AGP’s topline has been riding an upward trajectory since 2019; however, its bottom line started shrinking in 2021. Margins which improved in 2019 started nose-diving thereafter to bottom out in 2023. The detailed performance review of the period under consideration is given below.

In 2019, AGP’s topline posted a year-on-year rise of 16.19 percent to clock in at Rs.6,253.24 million. AGP’s flagship brand Rigix hit record sales of Rs.1000 million in 2019 with a market share of 17.5 percent. One-time price adjustment allowed by DRAP also played its due role in driving up the top line. AGP’s retail portfolio grew by 23 percent year-on-year in 2019, however, due to less public spending on healthcare, the institutional portfolio declined by 44 percent. Sales to Afghanistan also grew by 22.5 percent year-on-year in 2019 which also buttressed the topline growth. Export sales stood at 5.6 percent of AGP’s sales mix in 2019 versus 0.91 percent in 2018. Despite Pak Rupee depreciation, high inflation, and disruption in the availability of imported raw materials due to geopolitical tension, better sales mix, inventory management, and cost control measures enabled AGP to record 20.34 percent year-on-year growth in gross profit. GP margin also rose from 56.5 percent in 2018 to 58.5 percent in 2019. Distribution expenses grew by 12.19 percent year-on-year due to elevated sales volume. Administrative expenses grew by 24.13 percent year-on-year in 2019 as the company enhanced its workforce during the year to manage its expanding operations. Other expenses also grew by 10.17 percent year-on-year in 2019 on account of higher provisioning for WWF and WPPF as well as the Central Research Fund (CRF). However, as a percentage of sales, other expenses still stood at 2.7 percent. Other income dropped by 33.6 percent year-on-year in 2019 as unlike the previous year, there was no gain on the sale of fixed assets and no liabilities written back during 2019. Operating profit grew by 26.21 percent year-on-year in 2019. OP margin also rebounded to 32.8 percent in 2019 versus 30.2 percent in the previous year. Finance cost mounted by 13.46 percent year-on-year in 2019 on the back of the high discount rate in 2019. AGP’s long-term liabilities considerably declined during 2019 as the company repaid a huge amount. During the year, AGP acquired a nutraceutical plant; however, the capital expenditure was financed through internally generated funds rather than debt financing. As of December 2019, AGP doesn’t have any short-term liability on its books. AGP’s debt-to-equity ratio considerably reduced from 41 percent in 2018 to 29 percent in 2019. The imposition of super tax also had a negative effect on the bottom line, yet AGP managed to boast 19.86 percent year-on-year growth in its net profit which stood at Rs. 1446.39 million in 2019 with an NP margin of .1 percent versus 22.4 percent in the previous year. EPS also picked up from Rs.4.31 in 2018 to Rs.5.17 in 2019.

The topline growth stood at 11 percent in 2020 on the back of a 9 percent increase in the domestic retail portfolio and over 41 percent growth in sales to Afghanistan. Export sales climbed up to 10.63 percent of AGP’s sales mix in 2020. Rigix, Osnate-D, Ceclor, and Anafortan Plus continued to be the star products of AGP and drove major sales growth. Cost of sales grew by 18.95 percent year-on-year in 2020 due to Pak Rupee depreciation and one-off provisioning of COVID-19 antibody testing kits. Gross profit grew by a mere 5.51 percent year-on-year in 2020 whereas GP margin dipped to 55.6 percent. Administrative expenses grew by 43.59 percent year-on-year in 2020 mainly on the back of an increase in salaries and wages due to workforce enhancement as its Nutraceutical plant became operational in 2020. COVID-19-related preventive measures taken at the company premises also pushed the administrative expenses up during 2020. Marketing expenses were greatly contained and grew by only 8.5 percent year-on-year due to travel restrictions owing to COVID-19. Other expenses grew by 9.73 percent year-on-year on the back of higher provisioning for WWF, WPPF, and CRF. Other income grew by 180.43 percent year-on-year, however, stood at only 0.5 percent of the topline in 2020 as against 0.2 percent in 2019. Other income grew on the back of government grants and increased income on deposit accounts in 2020. Operating profit could post a trivial 1.31 percent year-on-year growth in 2020 while OP margin plummeted to 29.9 percent. Finance costs shrank during the year due to low discount rates and settlement of long-term financing during the year. With no short-term borrowings on its books, the debt-to-equity ratio further shrank to 24 percent in 2020. There was no super tax applicable in 2020. Consequently, the bottom line posted a 9.75 percent year-on-year rise in 2020 to clock in at Rs.1587.43 million with an NP margin of 22.9 percent. EPS grew to Rs.5.67 in 2020.

The topline growth was recorded at 6.83 percent year-on-year in 2021. While domestic sales grew by 14.8 percent in 2021, export sales drastically fell by 23 percent year-on-year due to political unrest and the closure of the Afghan border. Export sales stood at 7.53 percent of AGP’s sales mix in 2021. During the year, AGP acquired twenty-two well-established brands from a renowned multinational company, Sandoz AG through equity investment. This acquisition increased the product portfolio of AGP in the anti-infective and oncology segment; however, the full potential of the acquired product portfolio on AGP’s financial performance was not unleashed in 2021. Exchange rate volatility and inflationary pressure particularly at the end of the year pushed the cost of sales up by 7 percent year-on-year in 2021; however, the company was able to maintain its GP margin at 55.5 percent. The resumption of marketing and promotional activities coupled with an increase in the headcount to meet elevated sales targets pushed the marketing expense up by 14.94 percent year-on-year in 2021. Administrative expenses registered an enormous 72.87 percent year-on-year surge in 2021 mainly due to higher payroll expense. Other expenses slid by 14.18 percent year-on-year due to a drop in exchange loss. Other income grew by 46 percent year-on-year in 2021 owing to an increase in mark-up income on deposit accounts coupled with the amortization of government grants. Due to an increase in operating expenses, operating profit plunged by 3.74 percent year-on-year in 2021. OP margin also climbed down to 27 percent in 2021. Finance costs considerably declined by 41.17 percent year-on-year in 2021 due to a drop in discount rates coupled with the settlement of Sukuk during the year. The debt-to-equity ratio fell to 18 percent in 2021. Despite favorable movement in finance cost, the bottom line couldn’t sustain and posted a decline of 1.42 percent year-on-year to clock in at Rs.1564.93 million in 2021 with an NP margin of 21.1 percent. EPS dropped to Rs.5.59 in 2021.

Among all the years under consideration, AGP registered the highest topline growth of 38.29 percent year-on-year in 2022. This came on the back of a massive 25 percent growth in domestic sales and 75 percent growth in export sales as Afghan sales performed exceptionally well during the period. Export sales formed 11.83 percent of AGP’s sales mix in 2022. The topline growth was also buttressed by a time order from Director General Health Punjab which increased the institutional sales to around Rs.1000 million in 2022. The cost of sales massively grew by 52.56 percent year-on-year in 2022 due to a radical drop in the value of the Pak Rupee, high inflation, and a steep rise in energy and fuel charges. Gross profit increased by 26.85 percent year-on-year in 2022, however, GP margin dwindled to clock in at 50.9 percent. Administrative expenses grew by only 3.75 percent despite significant growth in the size of the business and the unprecedented level of inflation in 2022. Conversely, marketing expenses posted an enormous 58.13 percent year-on-year increase as the part of company’s strategy to pitch sales by strengthening sales teams. Other expenses also grew by 51.17 percent year-on-year in 2022 on the back of local currency depreciation. Other income grew by 183.33 percent in 2022 to reach 1.3 percent of sales in 2022 on the back of dividend income from subsidiary company OBS AGP. Operating profit grew by 7.84 percent year-on-year in 2022; however, OP margin dipped to 21 percent. Despite, huge repayments of long-term loans made during 2022, the high discount rate as well as increased short-term borrowings in 2022 pushed finance costs up by 52.47 percent year-on-year in 2022. Debt-to-equity ratio posted an uptick to clock in at 25 percent in 2022. Increased taxation due to the imposition of super tax also produced an adverse effect on the bottom line which shrank by 8.75 percent year-on-year in 2022 to clock in at Rs.1428.03 million with an NP margin of 13.9 percent. EPS also ticked down to Rs.5.1 in 2022.

In 2023, AGP’s net sales grew by 35 percent in 2023. This came on the back of a robust 27 percent year-on-year rise in domestic retail sales during the year. Sales to Afghanistan crossed the Rs.1500 million mark in 2023 and stood at 13.53 percent of AGP’s sales mix. Growth of the Nutraceutical business also contributed well to the overall topline growth. Cost of sales multiplied by 53.10 percent in 2023 due to high indigenous inflation, high cost of raw materials, elevated energy charges as well as Pak Rupee depreciation. Gross profit grew by 17.61 percent in 2023, however, GP margin dropped to its lowest level of 44.3 percent in 2023. Administrative expenses multiplied by 17.38 percent in 2023 due to higher payroll expenses on account of inflation and workforce enhancement. AGP’s workforce stood at 1574 employees in 2023 versus 1463 employees in 2022. Marketing expense multiplied by 28.52 percent in 2023 due to a planned increase in sales staff to buttress volumes. 10.82 percent year-on-year spike in other expenses in 2023 was the consequence of higher exchange loss although the company squeezed provisioning for WWF, WPPF, and CRF in 2023. Other income was enhanced by 42.54 percent in 2023 on account of higher dividends received from OBS AGP, a subsidiary company. Operating profit inched up by 7 percent in 2023; however, OP margin slumped to 16.7 percent. Finance costs surged by 330.40 percent in 2023 due to monetary tightening as well as an enormous rise in long-term and short-term borrowings in 2023. The company obtained a long-term loan of Rs.2364 million to inject equity in its subsidiary company for the purpose of acquiring certain products of Viatris Inc. Debt-to-equity ratio escalated to 57 percent in 2023. Net profit dwindled by 16.66 percent to clock in at Rs.1190.19 million with EPS of Rs.4.25 and NP margin of 8.6 percent in 2023.

Recent Performance (1QCY24)

AGP’s net sales grew by 35 percent during 1QCY24 mainly on the back of domestic retail sales volume which boasted a 32 percent enhancement during the period. Supplies to OBS AGP also contributed to topline growth during 1QCY24. Export sales slumped by 15.22 percent during 1QCY24 to clock in at 11.2 percent of AGP’s sales mix versus a share of 18.2 percent in the company’s sales mix during the same period last year. Cost of sales escalated by 47 percent in 1QCY24 on account of massive raw materials and conversion costs. Gross profit grew by 21.33 percent during 1QCY24, however, GP margin inched down to 41.7 percent versus 46.4 percent during the same period last year. Administrative and marketing expenses mounted by 28.27 percent and 12.75 percent respectively during 1QCY24 due to rising business volume as well as inflationary. Other expenses slid by 58.96 percent during 1QCY24 due to a considerable decline in exchange loss on account of recent stability in the value of a local currency. Other income strengthened by 740.42 percent during 1QCY24 due to dividend income from OBS AGP. Controlled operating expenses and robust other income resulted in an 85.14 percent year-on-year rise in operating profit in 1QCY24 with an OP margin of 18.9 percent versus OP margin of 13.8 percent recorded during 1QCY23. Finance cost surged by 585.91 percent during the period owing to a high discount rate and drastic rise in borrowings to inject equity into the subsidiary company and meet working capital requirements. The application of the highest slab rate of 10 percent for super tax resulted in diluted bottom line growth which was recorded at 26.91 percent during 1QCY24 versus year-on-year growth of 46.95 percent recorded in pre-tax profit for the period. AGP’s net profit stood at Rs.412.66 million in 1QCY24 with EPS of Rs.1.47 versus EPS of Rs.1.16 recorded in 1QCY23. Elevated finance costs and the impact of higher taxation squeezed the NP margin to 9.7 percent in 1QCY24 versus 10.3 percent in 1QCY23.

Future Outlook

The company is striving hard to minimize the impact of the adverse external environment by cost rationalization, increased local and export sales, and also by acquiring new brands to widen its product portfolio and market share as well as meet the emerging therapeutic needs across borders. The company has recently acquired certain brands from Viatris Inc.


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