Top 3 sectors to trade in according to analysts

1. Pharma Sector

Average EPS Growth: 66%

Sector outlook:

Despite its structural challenges, the pharmaceutical sector in Pakistan is entering FY26 with strong growth momentum, underpinned by resilient demand and improving earnings. The sector has achieved an impressive 18% CAGR over the past four years, with CY24 revenues reaching PKR 1,007 billion, supported by over 678 companies, including 26 multinationals.

Local manufacturers dominate the market with a 67%+ share, while the top 10 firms control nearly half of total industry revenue. This concentration highlights the competitive edge of key players like AGP and SEARL, which continue to expand earnings, reporting 57% and 87% EPS growth, respectively, despite the sector’s underdeveloped R&D ecosystem and reliance on imported New Chemical Entities (NCEs).

Looking ahead to FY26, the sector’s earnings outlook remains upbeat, thanks to a combination of volume growth, margin strength, and operational efficiencies. The dominance of cost-effective sourcing strategies, especially by local firms, has helped maintain superior gross margins, even as 85% of active pharmaceutical ingredients (APIs) are imported.

With expectations of 30–48% EPS growth in leading names, improving macroeconomic stability, and likely FX stabilization, the investment case for select pharma stocks strengthens. However, long-term expansion will hinge on greater local API production and better IP protections to spur innovation and reduce supply-side vulnerabilities.

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The latest earnings growth data for the pharmaceutical sector reveals strong momentum, particularly from SEARL and AGP, both of which have delivered standout performances. SEARL leads with an impressive 87% EPS growth, pointing to a sharp recovery possibly driven by cost efficiencies, price increases, or favorable base effects.

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The company is expected to maintain this trajectory with a 48% growth forecast, reflecting growing investor confidence in sustained profitability. AGP, meanwhile, posted a solid 57% EPS increase and is projected to grow earnings by another 30%, indicating both top-line strength and improving operational margins.

These figures suggest that the sector is entering FY26 on strong footing. While both companies are currently rated Neutral, the continued earnings momentum could pave the way for potential rerating, especially as macroeconomic stability and regulatory clarity improve.

The earnings visibility for both AGP and SEARL is further supported by their relatively stable product portfolios and improving cost structures. However, the sector remains sensitive to pricing caps, currency movements, and input cost volatility, which investors will closely watch despite the encouraging growth trends.

⚠️ 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 →