AGP to emerge undaunted from PKR devaluation, SEARL to face the maximum brunt

The recent PKR devaluation has spared no sector from its jolt. While some industries may have immediately realized the full impact of the rupee devaluation, others are yet to recognize the effect of it, with Pharmaceutical industry being one of them.

A report on Pakistan’s Pharmaceutical Industry by Intermarket Securities suggests that the current quarter will mostly bring bad news for the overall industry. The impact of PKR devaluation, however, will affect each company differently based on the degree of absorption of rupee devaluation.

Keeping the above conjecture in view, it is highly expected that AGP will remain undaunted towards the impact of PKR devaluation and will display relatively better resilience. The expected NPAT for the company has been stated at Rs. 263 million, with an EPS of Rs. 0.94, depicting a decline of 11% YoY. This should take full year earnings to Rs. 1.2 billion, flat on YoY basis, which is still better than most companies within the Pharmaceutical industry

SEARL, on the other hand, is expected to face the maximum brunt of PKR devaluation in its coming 2QFY19 results, with an expected NPAT of Rs. 636 million and EPS of Rs. 2.99, exhibiting a decline of 31% YoY.

“We think AGP will continue to stand out during the result season, where we expect GMs to clock in at 59% (vs. 61.7% in SPLY). On the other hand, we expect SEARL’s GMs to slide to c. 47.5% in 2Q vs. 62.8% in SPLY,” the analyst from Intermarket Securities said.

The PKR devaluation isn’t the only factor which has been hitting the pharma industry below the belt. The stay order against the recent 15% drug price hike from Peshawar High Court is likely applicable only in the KPK jurisdiction. But in case the stay order is extended country wide, this may reverse the 10-13% earnings boost expected to arise from the recent drug price hike.

Nevertheless, every cloud has a silver lining. The "Insaf Sehat Card" recently launched by the Prime Minister Imran Khan, which aims to provide free medical facility to the needy, is expected to boost pharmaceutical sales in the longer run. Under the Scheme, free healthcare worth PKR 720,000 (c. US$5,200) would be provided annually to each deserving family, with 15 million people likely to receive health benefits in the first two years.

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