Pharma Stock Valuations Are at a Discount, Is Now the Time to Buy?
Pakistan’s pharmaceutical sector has quietly morphed into a compelling value play. Despite major regulatory relief, margin expansion, and earnings growth, valuations across the board remain depressed—presenting an attractive entry point for long-term investors.
Historically low P/E ratios
Pharma companies listed on the PSX have historically traded at a forward P/E multiple of around 20x. Currently, leading players such as AGP, ABOT, GLAXO, and HALEON are trading at forward CY25E P/E multiples between 12x and 15x, well below their historical average and global comparables.
| Company | CY25E EPS | CY25E P/E | Fair Value (PKR/sh) | Current Price (PKR/sh) | Upside |
|---|---|---|---|---|---|
| AGP | 13.0 | 14.3x | 257 | 185 | 39% |
| ABOT | 81.0 | 11.9x | 1,307 | 961 | 36% |
| GLAXO | 31.5 | 12.4x | 503 | 390 | 29% |
| HALEON | 49.0 | 15.2x | 878 | 744 | 18% |
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What’s driving the discount?
The disconnect between price and value seems largely psychological—a carryover from past volatility. But recent developments have altered the sector’s risk profile dramatically:
- Deregulation of non-essential drugs, which make up ~58% of sector sales, has introduced pricing flexibility, historically the sector’s Achilles heel.
- Exchange rate stabilization has calmed raw material cost volatility.
- API prices have normalized, removing margin pressure from imported inputs.
- Earnings growth is real: For instance, AGP’s EPS is expected to rise from PKR 9.5 in CY24 to PKR 15.6 by CY26.
A rerating in the making?
With margins improving and top-line growth accelerating, a valuation rerating looks inevitable—especially for players with strong brand portfolios and high non-essential product mix like AGP and ABOT.
Additionally, strong dividend yields (3–4% range) make the current holding period rewarding, even before capital appreciation.
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Investor takeaway
If you’ve been waiting for a window to enter Pakistan’s pharmaceutical sector, this might be it. With valuations at a steep discount and structural improvements underway, investors could benefit from both earnings growth and multiple expansion.
⚠️ This post reflects the author’s personal opinion and is for informational purposes only. It does not constitute financial advice. Investing involves risk and should be done independently. Read full disclaimer →
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