{"id":9090,"date":"2025-05-21T10:51:38","date_gmt":"2025-05-21T05:51:38","guid":{"rendered":"https:\/\/ksestocks.com\/blog\/?p=9090"},"modified":"2025-05-21T10:51:42","modified_gmt":"2025-05-21T05:51:42","slug":"pharma-sector-earnings-rise-valuations-fall-is-it-a-buying-opportunity","status":"publish","type":"post","link":"https:\/\/ksestocks.com\/blog\/pharma-sector-earnings-rise-valuations-fall-is-it-a-buying-opportunity\/","title":{"rendered":"Pharma sector earnings rise, valuations fall: is it a buying opportunity?"},"content":{"rendered":"\n<h2 class=\"wp-block-heading\">Key takeaways:<\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Net revenue<strong> rose 12% YoY<\/strong> to Rs80bn in 1QCY25<\/li>\n\n\n\n<li>Earnings <strong>grew 78% YoY<\/strong>; gross margins climbed to 39%<\/li>\n\n\n\n<li>The sector underperformed KSE-100 by 6% CYTD\u2014presents a buying opportunity<\/li>\n<\/ul>\n\n\n\n<p>The pharmaceutical sector in Pakistan delivered a strong performance in 1QCY25, with listed companies showing robust profitability driven by favorable macro and regulatory developments. Using a sample of ten listed players, industry revenue rose by 12% year-on-year to Rs80 billion, primarily due to price hikes following the deregulation of non-essential drugs in early 2024. The deregulated regime enabled pharmaceutical firms to better navigate cost pressures and protect margins.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Strong earnings momentum<\/h2>\n\n\n\n<p><br>The sample recorded an <strong>earnings growth of 78% YoY,<\/strong> supported by improved pricing, declining active pharmaceutical ingredient (API) costs, and a stable currency. Gross margins <strong>improved by 8 percentage points YoY to 39%<\/strong>, while operating margins also trended upward. Companies such as <strong><a href=\"https:\/\/ksestocks.com\/blog\/tag\/bfbio\/\" target=\"_blank\" rel=\"noopener\" title=\"BFBIO\">BFBIO<\/a><\/strong>, <strong><a href=\"https:\/\/ksestocks.com\/blog\/tag\/feroz\/\" target=\"_blank\" rel=\"noopener\" title=\"FEROZ\">FEROZ<\/a><\/strong>, <strong><a href=\"https:\/\/ksestocks.com\/blog\/tag\/haleon\/\" target=\"_blank\" rel=\"noopener\" title=\"HALEON\">HALEON<\/a><\/strong>, and <strong><a href=\"https:\/\/ksestocks.com\/blog\/tag\/agp\/\" target=\"_blank\" rel=\"noopener\" title=\"AGP\">AGP <\/a><\/strong>were standout performers, with BFBIO leading the growth chart at 41% YoY.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">QoQ decline due to seasonality<\/h2>\n\n\n\n<p><br>On a sequential basis, sector revenues declined 2% QoQ due to seasonal factors, with <strong><a href=\"https:\/\/ksestocks.com\/blog\/tag\/glaxo\/\" target=\"_blank\" rel=\"noopener\" title=\"GLAXO\">GLAXO <\/a><\/strong>showing the sharpest drop at 11% QoQ. <strong><a href=\"https:\/\/ksestocks.com\/blog\/tag\/searl\/\" target=\"_blank\" rel=\"noopener\" title=\"SEARL\">SEARL<\/a><\/strong>, <strong><a href=\"https:\/\/ksestocks.com\/blog\/tag\/abot\/\" target=\"_blank\" rel=\"noopener\" title=\"ABOT\">ABOT<\/a><\/strong>, <strong><a href=\"https:\/\/ksestocks.com\/blog\/tag\/hinoon\/\" target=\"_blank\" rel=\"noopener\" title=\"HINOON\">HINOON<\/a><\/strong>, and AGP also posted marginally negative sequential growth. Despite these dips, gross margins remained flat QoQ as cost-side benefits offset lower sales volumes.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Sector outlook remains bright<\/h2>\n\n\n\n<p><br>Looking forward, the outlook remains upbeat. The expected CPI-linked price increase for essential drugs in 2HCY25 should support further earnings growth. Moreover, the deregulation of non-essential products, enhanced drug availability, and declining API prices all point to expanding margins and top-line resilience.<\/p>\n\n\n\n<p>From a valuation perspective, the pharmaceutical sector has <strong>underperformed the KSE-100 index by 6% so far in 2025<\/strong>, creating a compelling entry point for long-term investors. Despite recent price corrections, fundamentals remain strong, and the earnings outlook is supportive.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Key growth contributors<\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>AGP<\/strong> maintained industry leadership in operating margins<\/li>\n\n\n\n<li><strong>SEARL<\/strong> posted the highest selling expense ratio, limiting margin expansion<\/li>\n\n\n\n<li><strong>FEROZ and HALEON<\/strong> were notable in both revenue growth and cost management<\/li>\n\n\n\n<li><strong>GLAXO<\/strong> underperformed both YoY and QoQ, due to product mix pressures<\/li>\n<\/ul>\n\n\n\n<p><strong>Industry snapshot<\/strong><br>The total size of the pharmaceutical market in Pakistan reached <strong>Rs1.04 trillion as of Feb-2025<\/strong>, with volumes holding steady at <strong>3.8 billion units<\/strong>\u2014a 4% YoY increase. With a four-year CAGR of 19%, the sector is steadily growing in value terms, with key structural reforms now unlocking more predictable profitability.<\/p>\n\n\n\n<p><br>The pharma sector&#8217;s 1QCY25 performance underscores its ability to deliver earnings even in a challenging macro backdrop. With pricing freedom, lower API costs, and improving operating metrics,  JS Global maintains an <strong>overweight<\/strong> stance on the sector. Select names with superior margins and efficient cost structures, like <strong>AGP and SEARL<\/strong>, remain their preferred picks.<\/p>\n\n\n\n<p><strong>Source: JS Research <\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The pharmaceutical sector in Pakistan delivered a strong performance in 1QCY25, with listed companies showing robust profitability driven by favorable macro and regulatory developments. Using a sample of ten listed players, industry revenue rose by 12% year-on-year to Rs80 billion, primarily due to price hikes following the deregulation of non-essential drugs in early 2024. The deregulated regime enabled pharmaceutical firms to better navigate cost pressures and protect margins.<\/p>\n","protected":false},"author":9252,"featured_media":6576,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[154,343],"tags":[380,200,378,377,198,95,231,162],"class_list":["post-9090","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-analysis","category-sector-analysis","tag-abot","tag-agp","tag-bfbio","tag-feroz","tag-glaxo","tag-haleon","tag-hinoon","tag-searl"],"featured_image_src":{"landsacpe":["https:\/\/ksestocks.com\/blog\/wp-content\/uploads\/2024\/11\/pharma-sector-psx-6-1140x445.jpg",1140,445,true],"list":["https:\/\/ksestocks.com\/blog\/wp-content\/uploads\/2024\/11\/pharma-sector-psx-6-463x348.jpg",463,348,true],"medium":["https:\/\/ksestocks.com\/blog\/wp-content\/uploads\/2024\/11\/pharma-sector-psx-6-300x188.jpg",300,188,true],"full":["https:\/\/ksestocks.com\/blog\/wp-content\/uploads\/2024\/11\/pharma-sector-psx-6.jpg",1920,1200,false]},"_links":{"self":[{"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/posts\/9090","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/users\/9252"}],"replies":[{"embeddable":true,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/comments?post=9090"}],"version-history":[{"count":1,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/posts\/9090\/revisions"}],"predecessor-version":[{"id":9322,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/posts\/9090\/revisions\/9322"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/media\/6576"}],"wp:attachment":[{"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/media?parent=9090"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/categories?post=9090"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ksestocks.com\/blog\/wp-json\/wp\/v2\/tags?post=9090"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}