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.

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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 →