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, 2024, AGP has a total of 280 million shares outstanding which are held by 3808 shareholders. Aitkenstuart Pakistan (Private) Limited (parent company) has the majority stake of 55.8 percent shares of AGP. Collectively, associated companies, undertakings and related parties hold 74.13 percent shares of AGP.
Foreign companies account for 4.85percent shares of the company while local general public holds 3.44 percent shares. Around 3 percent of the company’s shares are held by Modarabas& Mutual Funds and1.84 percent by Banks, DFIs and NBFIs. The remaining shares are held by other categories of shareholders.
Historical Performance (2019-24)
AGP’s topline has posted year-on-year growth over the period under consideration. Conversely, its bottomlinewhich was growing until 2020 started shrinking thereafter followed by a staggering rebound in 2024. The margins which improved in 2019 started nose-diving thereafter to bottom out in 2023. In 2024, the margins picked up. 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 percentto clock in at Rs.6,253.24 million. AGP’s flagship brand Rigix hit the record sales of Rs.1000 million in 2019 withmarket share of 17.5 percent. One time price adjustment allowed by DRAP also played its due role in driving up the topline.
AGP’s retail portfolio grew by 23 percent year-on-year in 2019, however, due to less public spending on healthcare, 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 2019versus 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 56.50 percent in 2018 to 58.52 percent in 2019. Distribution expense grew by 12.19 percent year-on-year due to elevated sales volume.
Administrative expense 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 expense also grew by 10.17 percent year-on-year in 2019 on account of higher provisioning for WWF and WPPF as well as Central Research fund (CRF).
However, as a percentage of sales, other expense still stood at 2.7 percent. Other income dropped by 33.6 percent year-on-year in 2019 as unlike 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 32.81 percent in 2019 versus OP margin of 30.20 percent in the previous year. Finance cost mounted by 13.46 percent year-on-year in 2019 on the back of 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 anutraceutical 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. Imposition of super tax also had a negative effect on the bottomline, 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 NP margin of 23.13 percent versus NP margin of 22.4 percentregistered 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 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. AGP’s net sales clocked in at Rs. 6946.36 million. 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 55.58 percent. Administrative expenses grew by 43.59 percent year-on-year in 2020 mainly on the back of 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 expense grew by 9.73 percent year-on-year in 2020 on the back of higher provisioning for WWF, WPPF and CRF. Other income grew by 180.43 percent year-on-year on the back of government grant and increased income on deposit accounts in 2020.
Operating profit could posted a paltry 1.31 percent year-on-year growth in 2020 while OP margin plummeted to 29.92 percent. Finance cost shrank by 33 percent during the year due to low discount rate and settlement of long-term financing during the year. There was no super tax applicable in 2020. Consequently, bottomlineposted 9.75 percent year-on-year rise in 2020 to clock in at Rs.1587.43 million with NP margin of 22.85 percent. EPS grew to Rs.5.67 in 2020.
AGP’s topline postedyear-on-year growth of 6.83 percent to clock in at Rs.7420.46 million 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 closure of 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’ financial performancewas 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 55.50 percent. The resumption of marketing and promotional activities coupled with an increase in the head count to meet elevated sales targets pushed the marketing expense up by 14.94 percent year-on-year in 2021.
Administrative expense registered an enormous 72.87 percent year-on-year surge in 2021 mainly due to higher payroll expense. Other expense 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 increase in mark-up income on deposit accounts coupled with amortization of government grant.
Due to increase in operating expense, operating profit plunged by 3.74 percent year-on-year in 2021. OP margin also climbed down to 26.96 percent in 2021. Finance cost 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.
Despite favorable movement in finance cost,bottomline 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 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 to clock in at Rs. 10,262.02 million 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 one time order from Director General Health Punjab which increased the institutional sales to around Rs.1000 million in 2022. Cost of sales massively grew by 52.56 percent year-on-year in 2022 due to radical drop in the value of Pak Rupee, high inflation and 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 business and unprecedented level of inflation in 2022. Conversely, marketing expenses posted an enormous 58.13 percent year-on-year increase on account of company’s strategy to pitch sales by strengthening sales teams. Other expense 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 at 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, high discount rate as well increased short-term borrowings in 2022 pushed finance cost up by 52.47 percent year-on-year in 2022. Increased taxation due to imposition of super tax also produced an adverse effect on the bottomline which shrank by 8.75 percent year-on-year in 2022 to clock in at Rs.1428.03 million with NP margin of 13.92 percent. EPS also ticked down to Rs.5.1 in 2022.
In 2023, AGP’s net sales grew by 35 percent to clock in at Rs.13,857.77 million 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 Rs.1500 million mark in 2023 and stood at 13.53 percent of AGP’s sales mix. Growth of 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 44.32 percent in 2023. Administrative expense multiplied by 17.38 percent in 2023 due to higher payroll expense 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 planned increase in sales staff to buttress volumes. 10.82 percent year-on-year spike in other expense in 2023 was the consequence of higher exchange loss although the company did lesser provisioning for WWF, WPPF and CRF in 2023. Other income enhanced by 42.54 percent in 2023 on account of higher dividend received from OBS AGP, a subsidiary company.
Operating profit inched up by 7 percent in 2023; however, OP margin slumped to 16.66 percent. Finance cost surged by 330.40 percent in 2023 due to monetary tightening as well as enormous rise in long-term and short-term borrowings in 2023. The company obtained long-term loan of Rs.2364 million to inject equity in its subsidiary company for the purpose of acquisition of certain products of Viatris Inc. 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 8.60 percent in 2023.
In 2024, AGP’s net sales mounted by 33.82 percent to clock in at Rs.18,543.81 million. This came on the back of a robust 27.8 percent growth in domestic sales and 48.1 percent growth in export sales.
The superior performance of the company’s flagship brands – Rigix, Osnate and Ceclor coupled with the expansion in the nutraceutical segment played a pivotal role in driving up the company’s sales in 2024. The company also increased its prices after the deregulation of prices of non-essential medicines. This resulted in 44.44 percent growth in gross profit with GP margin picking up to 47.84 percent after four years of decline.
Administrative expense mounted by 27.50 percent in 2024 due to higher payroll expense on account of inflationary pressure, higher research cost and software license renewal and maintenance fee incurred during the year.
Distribution expense surged by 26.17 percent in 2024 due to higher salaries of sales force, increased sales promotion charges, travelling & conveyance charges as well as freight & handling charges incurred during the year. Other expense escalated by 14.30 percent in 2024 due to higher provisioning done for WWF, WPPF and CRF.
Conversely, exchange loss slid during the year due to stability exhibited by the local currency towards the end of CY24. Other income dwindled by 11.18 percent in 2024 due to lower dividend income received from the subsidiary company, OBS AGP (Private) Limited.
AGP recorded 72.83 percent improvement in its operating profit in 2024 with OP margin picking up to 21.52 percent. Finance cost multiplied by 43.87 percent in 2024 due to higher discount rate. Net profit strengthened by 75 percent to clock in at Rs.2083.58 million in 2024. This translated into EPS of Rs.7.44 and NP margin of 11.24 percent in 2024.
Recent Performance (1QCY25)
During the first quarter of the ongoing calendar year, AGP recorded 12.60 percent year-on-year rise in its net sales which clocked in at Rs.4814.159 million. This came on the back of robust local sales mainly driven by its key brands. Export to Afghanistan and supplies to group companies also played an important role in driving up the company’s sales during 1QCY25.
Efficient sales mix along with price optimization and cost control resulted in 21.55 percent improvement in gross profit in 1QCY25 with GP margin clocking in at 45 percent versus GP margin of 41.71 percent recorded in 1QCY24. Administrative expense ticked up by only 2.88 percent during the period under review as the company kept a strict control on its operating expense.
Conversely, distribution expense posted 22 percent hike during 1QCY25 on the back of expansion of sales force as well as travelling & conveyance expense incurred to transfer the sales force to new export destinations in order to explore them and make a strong footing in new international locations. Other expense escalated by 17.55 percent in 1QCY25 seemingly due to higher provisioning done for WWF, WPPF and CRF. Other income dwindled by 91 percent in 1QCY25 on account of no dividend received from OBS AGP in 1QCY25.
AGP’s operating profit picked up by 8 percent in 1QCY25, however, OP margin slightly ticked down to 18.18 percent versus OP margin of 18.95 percent recorded in 1QCY25. Reduction in discount rate resulted in 49.79 percent decline in finance cost in 1QCY25. AGP’s net profit strengthened by 12.85 percent to clock in at Rs.465.70 million in 1QCY25. This translated into EPS of Rs. 1.66 in 1QCY25 versus EPS of Rs.1.47 recorded in 1QCY24. NP margin slightly ticked up from 9.65 percent in 1QCY24 to 9.67 percent in 1QCY25.
Future Outlook
The company is striving hard to minimize the impact of 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 the borders. The company has recently acquired certain brands from Viatris Inc.