PACRA Maintains Entity Ratings of AGP Limited

Lahore, November 07, 2019 (PPI-OT): The ratings reflect AGP’s established market position and long track record in the pharmaceutical industry. The pharmaceutical industry has witnessed a high rate of sustained growth over the years. Cost-efficiencies as well as demand inelasticity benefits the industry players. The latest price revision, and CPI-linked pricing criteria recently implemented, has indicated a positive sign for the sector. AGP’s core profitability is strong in comparison with most of the peers; any downward revision must remain range-bound. Ratings incorporate AGP’s strong and sizeable cash flows and their adequacy to service the debt. Consequently, debt servicing ratios has improved.

Interest coverage increased with an improvement in EBITDA and leverage reduced on account of debt repayments on its Sukuk. Debt metrics need to be upheld. Benefits from the expansion initiatives to develop new products should lead to healthy demand and strategic alliance with Mylan, to promote their product portfolio in Pakistan enables volumetric growth as well as growth in locally manufactured goods. AGP’s 82% business is through sole distributor Muller and Phipps Pakistan (Pvt) Limited (M and P); going forward this concentration risk may pose challenge. However, the comfort can be taken from the presence of M and P’s shareholding in AGP. Presence of OBS Group in the pharmaceutical sector provides strength, in the form of group synergies, to AGP’s positioning within the industry.

The ratings are dependent on continued sustainability of profits and market share. Adequacy of cash flows and availability of alternative resources to make debt-related payment remains critical. Meanwhile, compliance with internally-defined leveraging metrics is a prerequisite. Moreover, the instrument rating is dependent upon upholding of all major covenants.

For more information, contact:
Analyst
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425
Email: hammad.rashid@pacra.com
Web: www.pacra.com

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