www.darson.com.

pk - UAN: 111 900 400

Pharmaceuticals
Tuesday, September 15, 2020
AGP – Best-in-Class Margins
• We have a BUY stance on AGP with Jun’21 TP of Rs139.49, implies 21% upside MARKET STATISTICS
from LDCP of Rs115.08. The stock has gained 17% since Jan’20 and we think the
rally has further legs. Stock performance vs. KSE100 index
• AGP’s 5-yr sales and profit CAGRs are both projected to at 15%/20% 50,000 140
respectively. AGP trades at a P/E 17.17 vs industry average of 27.19. Consistent 40,000
120
revenue growth and strong bottom-line translation deserve higher valuations, 100
30,000 80
in our view. 60
20,000
• Company has highest GM profile in Pakistan’s listed pharmaceutic space. 40
10,000
• As per DRAP amendment of MRPS, we expect company will increase its 20
0 0
essential medicine prices equal to 70% of CPI (up to 7%) from Oct’20.

16-Oct-19

16-Mar-20
16-Apr-20
16-Dec-19

16-May-20
16-Jun-20
16-Nov-19
16-Sep-19

16-Jan-20
16-Feb-20

16-Aug-20
16-Jul-20
Overview on 1HCY20 Result- Earning increased
AGP posted half yearly profit of 754.76mn (EPS: 2.70) as compared to the
320.07mn (EPS: 1.14) in SPLY. Net sales in HY20 is clocked at 3.17bn vs 3.16bn in KSE 100 Index AGP
previous year despite the supply chain disruption. Gross profit decreased to 1.74bn Source: PSX, Darson Research
from 1.84bn (declined by 5.02%) due to the devaluation of the local currency and
variation In the product portfolio.
AGP - Key Indicators
AGP growth prospect Current Price (Rs) 115.08
• AGP is currently evaluating its organic growths through acquisitions and Target Price (Rs) 139.49
diversifications. In 2019, they acquired nutraceutical plant, which will start Stance BUY
production in the coming months, which will allow company to enter in a new Upside/Downside 21.22%
business segment. As per our estimates, this will add additional revenue of 52-Week High (Rs) 126.93
Rs150-200mn per year. Some new products have also been launched such as
52-Week Low (Rs) 52.30
Afdol Syrup 120ml & Afdol 10mg tablet, Gastasid 20mg & Gastasid 40mg tablet.
Outstanding Shares (In 000) 280,000
• Top three products, Rigix, Ceclor & Osnate, had a cumulative sales of Rs3bn in Market Cap (In 000) 32,222,400
2019, the main product manufactured is Rigix, which is the best-selling anti- Free Float 30.00%
histamine medicine for the pediatric segment. Rigix is AGP’s largest revenue Source: PSX, Darson Research
contributor with a market share of aprox. 17.5% and achieved Rs1bn sales in
2019. Other major products of AGP are Keflex and Cinklare.

• We expect AGP will gain even more momentum as the govt. made changes to
its drug pricing policy, which is linked to the CPI, which will help company to
maintain its profitability constant.

• The company continued to grow and showed stable performance, despite the
disruption of the supply chain caused by COVID-19 but now govt. has lifted the
restriction, the company distribution cycle is now normalized.

Risks to the investment include: 1) Unavailability of raw material 2) PKR

devaluation risk 3) Regulatory risk 4) Additional duties and taxes.

AGP - Financial Snapshot

CY18A CY19A CY20E CY21E
EPS (Rs) 4.31 5.17 6.78 8.22
DPS (Rs) 1.3 2.0 2.0 2.5
P/Ex 26.70 22.28 16.99 14.01
DY (%) 1.09% 1.74% 1.74% 2.17%
Gross Margin 56.50% 58.52% 58.58% 58.61%
EBIT Margin 22.42% 23.13% 26.35% 27.84%
Source: Co. Financials, Darson Research

Mamoona Asghar
Mamoona.asghar@darson.com.pk
Tel: 021 32471086-87

Notified Research Entity | DISCLAIMER - For important disclaimer and contact details, see the last page of the report Page No. 1
 www.darson.com.pk - UAN: 111 900 400

Pharmaceuticals

Graphical Presentation

GM vs NPM Stable Payout

45.00%
70.00% 38.72%
40.00%
60.00% 56.50% 58.52%58.58%58.61% 58.05% 58.44%58.42%
35.00% 30.89% 29.79%
50.00% 29.00% 29.52% 30.43% 28.53%
30.00%
40.00%
25.00%
28.67% 29.96% 30.85%
30.00% 26.35% 27.84%
22.42% 23.13% 20.00%
20.00% 15.00%

10.00% 10.00%

0.00% 5.00%
2018 2019 2020F 2021F 2022F 2023F 2024F
0.00%
Net profit Margin Gross Profit Margin 2018 2019 2020F 2021F 2022F 2023F 2024F

Source: Co. Financials, Darson Research Source: Co. Financials, Darson Research

Debt to Equity of the company is expected to have

Earnings to Grow declining trend leading near to zero by 2023

35.00%
18.00 16.68
28.69%
16.00 30.00%
14.02
14.00
11.75 25.00%
12.00
9.71
10.00 20.00%
8.22 16.19%
8.00 6.78
15.00%
6.00 5.17
5 8.25%
4.00 4 10.00%
3 3.5
2.00 2 2 2.5 4.60%
5.00% 1.93%
0.00 0.01% 0.01%
2018 2019 2020F 2021F 2022F 2023F 2024F 0.00%
2018 2019 2020F 2021F 2022F 2023F 2024F
EPS DPS

Source: Co. Financials, Darson Research Source: Co. Financials, Darson Research

Page No. 2
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any of the securities or other financial instruments mentioned or issuers described herein at any time and
1 KARACHI
may make a purchase and/or sale, or offer to make a purchase and/or sale of any such securities or other Room # 808, Business & Finance Centre, I.I.
financial instruments from time to time in the open market or otherwise. Chundrigar Road, Karachi.
UAN: 021 111 900 400, Fax: 021 32471088
Risk Associated with Target Price:
Any inability to compete successfully in their markets may harm the business. This could be a result of Branch Network
many factors which may include geographic mix and introduction of improved products or service offerings
by competitors. The results of operations may be materially affected by global economic conditions 2 KARACHI
generally, including conditions in financial markets. The company is exposed to market risks, such as Office No. 516, 5th Floor, PSX Building,
changes in interest rates, foreign exchange rates and input prices. Stock Exchange Road, Karachi.
Phone: 021-32425538

Rating System: LAHORE

3
If; LSE BRANCH
• Expected return >15% - Buy Call Room No. 102, 1st Floor, LSE Building,
• Expected Return is in between 0% to 15% - Neutral/Hold Call Aiwan-e-Iqbal Road, Lahore.
• Expected Return <0% - Sell Call Phone: 042-36309842 042-36314293

Valuation Methodology 4 LIBERTY BRANCH

Office No. 404, 3rd Floor, Liberty Tower,
To arrive at our period end target prices, DSL uses Liberty Gulberg, Lahore.
different valuation methodologies including: Phone: 042-6366263, 6364208 042-5789705

• Discounted cash flow (DCF, DDM) 5 GUJRANWALA

• Justified price to book (JPB) Office # 3, Main Block, 1st Floor,
• Relative Valuation (P/E, P/B, P/S etc.) GDA Trust Plaza, G.T. Road,
Gujranwala.
• Equity & Asset return based methodologies (EVA, Residual Income etc.)
Phone: 0553-732963-64, 0321-6449554

6 DERA ISMAIL KHAN

2nd Floor, State Life Building,
Near Skynet Courier Office, Circular Road,
Dera Ismail Khan.
Phone: 0966-730906

7 SARGODHA
Office # 3, 1st Floor, Al-Munir Market,
Liaquat Bazar, Sargodha.
Phone: 0483-701141, 0333-9804899

8 JHELUM
1st Floor, Metro Trade Centre,
Near Shaloom Centre, Al-Markaz Road,
Jehlum.
Phone: 0544-626087, 832289

9 FAISALABAD
Room No. 193-195, 1st Floor, City Mall,
Chen One Road, Faisalabad.