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AGP Limited’s revenue pushed up by 29.6% and net profit by 6.9% in the calendar year 2023 compared to 2022, reports WealthPK. The company earned a revenue of Rs18.7 billion and a net profit of Rs1.82 billion during CY23. The revenue and profit growth was attributed to increase in domestic sales of key products and higher exports to Afghanistan. Additionally, the company’s gross profit jumped 36.95% to Rs10.03 billion in CY23. As a result, the pharmaceutical company saw its gross margin increase to 53.57% in CY23 from 50.70% in CY22.

Administrative, marketing and selling expenses, finance costs and other expenses surged by 51.44% to Rs7.4 billion in CY23. The company linked this increase in expenditure to the rupee depreciation during the period. Despite the significant rise in expenses, the company managed to obtain a profit-before-tax of Rs2.63 billion in CY23 compared to Rs2.44 billion in CY22, indicating a modest growth of 7.93%. However, the company's net profit margin slipped to 9.73% in CY23 from 11.79% in CY22. This was the result of a rise in the operational costs due to some external factors and currency devaluation.  A marginal improvement was observed in the earnings per share (EPS), which increased to Rs5.59 in CY23 from Rs5.51 in the previous calendar year.

Profitability ratios analysis

From 2018 to 2023, there was an overall reduction in the gross profit to sales, net profit to sales, return on equity and operational leverage ratios. This was the result of lower profitability and rising goods costs as a result of currency depreciation.

In 2018, the gross and net profit margins stood at 56.50% and 22.42%, respectively. The operational leverage ratio stood at 0.07% and its return on equity was 18.95%. The ratios improved in 2019 but then declined in 2020, 2021, 2022 and 2023. The company posted a gross profit margin of 44.32%, net profit margin of 8.59%, and return on equity of 10.97% in 2023. The company's operational leverage ratio was -0.55% in 2021, but improved to 0.20% in 2022 and remained unchanged in 2023.

Liquidity ratios analysis

The company's ability to meet its obligations with its assets is gauged by the current ratio. AGP Limited's current ratio stayed above 1.2 from 2018 to 2023, reflecting its stable liquidity position. However, this ratio kept decreasing from 2021 onwards, reaching the lowest ratio of 1.29 in 2023. This was because of the rise in debt obligations. In 2020, the company recorded the highest current ratio of 1.71.

Similarly, a company's ability to meet its short-term obligations using its most liquid assets is evaluated by the quick or acid test ratio. AGP Limited's acid ratio remained below 1 from 2018 to 2023, suggesting a higher risk due to insufficient quick assets to meet the short-term liabilities. The company's quick ratio ranged from a low of 0.65 in 2023 to a high of 0.95 in 2021.

Historical trend analysis

The company's EPS fluctuated, indicating ups and downs in profitability due to market dynamics, regulatory changes and economic uncertainty. The company recorded the lowest EPS of Rs4.25 in 2023 and the highest of Rs5.67 in 2020. The price-to-earnings ratio fluctuated over the period under review. The lowest price-to-earnings ratio of 12.74 was witnessed in 2022 and the highest of 20.29 in 2018.

Pharmaceutical sector analysis

To gauge the performance of the pharmaceutical sector companies, the EPS for the year 2023 has been used as a proxy for comparison. In 2023, Highnoon Laboratories Limited led the sector with an EPS of Rs57.71, followed by Ferozsons Laboratories Limited with an EPS of Rs4.35. IBL HealthCare Limited secured the third spot in the sector with an EPS of Rs4.33. This shows these companies' profit generation was greater for each share of their stocks than other firms. AGP Limited managed to acquire the fourth spot in the sector with an EPS of Rs4.25. Otsuka Pakistan Limited witnessed a loss per share of Rs0.6 in 2023.

Company profile

AGP Limited was founded in May 2014 as a public limited company. It manufactures various pharmaceutical products for sale both locally and internationally.

Credit: INP-WealthPk