Earnings Report /
Pakistan

AGP Limited: 1QCY20 review: Decent results in a tough environment

  • AGP posted 1QCY20 NPAT of PKR435mn (EPS: PKR1.55), flat yoy but up 14%qoq

  • Gross margins are lower than expected at 55.3% (vs. 57.9% SPLY) but compensated by lower admin costs

  • AGP trades at a CY20/21f P/E of 13.4x/12.0x and P/S of 3.4x/3.1x respectively. We have a Dec’20 TP of PKR100/sh

Yusra Beg
Yusra Beg

Senior Investment Analyst

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Intermarket Securities
30 April 2020

AGP posted 1QCY20 NPAT of PKR435mn (EPS: PKR1.55), flat yoy but up 14%qoq. Although margins are lower than expectation at 55.3% (vs. 57.9% in 1QCY19) due to inventory buildup and suppressed sales of high margin drugs, this is largely compensated by lower admin costs. 

1QCY20 Review highlights: 

AGP reported 1QCY20 sales of PKR1,756mn, up 9%yoy and 4%qoq. We understand sales for prescription drugs (which tend to carry higher margins) remained suppressed this quarter, while the company worked towards building inventory ahead of the Covid-19 outbreak.

GMs clocked in at 55.3% in 1QCY20, lower vs. 57.9% in 1QCY19 and 60.3% in 4QCY19. This was likely led by inventory procurement at a higher PKR/USD (c. 10% slippage on average during the quarter). This, coupled with a change in the sales portfolio led to weaker than expected GMs. 

SG&A expenses declined 6%yoy despite an increase in sales. We understand this was led by lower promotional activity and traveling costs during March’20.

The effective tax rate (ETR) rose to 20.1% in 1QCY20 vs. 15.3% in SPLY in line with changes in taxation policies.

Despite a tough macroeconomic environment, this is a decent result by AGP. While margins may remain on the lower side in the coming quarter, this should begin to normalize from 2HCY20, in our view. AGP trades at a CY20/21f P/E of 13.4x/12.0x and P/S of 3.4x/3.1x respectively. We have a Dec’20 TP of PKR100/sh on the name.