VIS reaffirms Entity Ratings of Citi Pharma Limited

December 18, 2024 (MLN): VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Citi Pharma Limited (PSX: CPHL) at ‘A/A1’ (Single A/A One) according to the press release issued today.

A medium to long-term rating of ‘A’ indicates good credit quality; protection factors are adequate, it added.

Risk factors may vary with possible changes in the economy.

Short-term rating of ‘A1’ indicates a strong likelihood of timely repayment of short-term obligations with excellent liquidity factors.

The outlook on the assigned ratings is ‘Stable.’

Citi Pharma Limited (CPHL) was established on 8 October 2012, and began its journey in the pharmaceutical sector following the acquisition of Askari Pharmaceuticals (Private) Limited (APPL) from the Army Welfare Trust in 2013.

This strategic acquisition enabled CPHL to inherit APPL's operations, focusing on the production and distribution of Active Pharmaceutical Ingredients (APIs) and formulation drugs.

Transitioning into a public unlisted company in October 2020, CPHL achieved a significant milestone by listing on the Pakistan Stock Exchange on 9 July 2021.

Today, it stands as a key player in Pakistan’s pharmaceutical industry, renowned for producing high-quality APIs like Paracetamol.

The Company operates across two core segments APIs and pharmaceutical formulations supporting the production of Finished Pharmaceutical Products (FPPs) by combining APIs with other essential compounds.

The assigned ratings reflect the low business risk associated with the API industry, driven by high demand and low economic sensitivity.

This is further supported by government policies promoting local production to reduce dependency on imports from India and China.

Additionally, high entry barriers, including stringent regulations, lengthy approval processes, and substantial research and development investments, serve to moderate competition in the sector.

The ratings reflect CPHL's sustained topline growth over the years, achieving a 4 year Compound Annual Growth Rate (CAGR) of 37.0%.

Margins in the API segment remain relatively low, necessitating higher working capital investment.

The Company is strengthening its capabilities through partnerships with global firms such as Murli Krishna Pharma (India) and Hangzhou Newsea Technology Co. Ltd (China).

These collaborations aim to enhance API production, incorporate advanced automation, and position the Company for potential expansion into international markets.

CPHL is also diversifying into the high-margin formulation segment by developing its own brands and focusing on institutional sales, supported by increased provincial healthcare budgets.

Additionally, the Company is expanding its footprint in the nutraceutical export market.

CPHL is addressing industry challenges, such as client and product concentration, by diversifying its portfolio and expanding its customer base.

The Company maintains a strong liquidity profile, robust profitability, and sound financial management, with a strategic focus on meeting the pharmaceutical industry's evolving demands.

Going forward, the successful execution of these strategies, while sustaining revenue growth and maintaining liquidity and capitalization metrics aligned with the assigned ratings, will remain critical.

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