By: InterMarket Securities Limited
Pharmaceuticals returned a robust 25.2%CYTD, with the consumer healthcare business in general overriding uncertainty surrounding measures undertaken by DRAP in the Drug Policy 2015. Outperformers included SEARL (+107%CYTD), FEROZ (+88%CYTD) and HINOON (+78%CYTD) with the market clearly rewarding high growth despite unresolved sector issues.
Our sample pharma space (5 companies) posted combined 2QCY15 NPAT of PkR1.84bn (+39%YoY), leading to combined 1HCY15 NPAT of PkR3.67bn (+32%YoY). FEROZ remained in the limelight on the back of massive volumetric uptick (Sovaldi) followed by SEARL and HINOON. On the flipside, ABOT and GLAXO failed to impress on slow volumetric growth and squeezed margins during 1HCY15.
As per Bloomberg estimates, Pakistan pharmaceuticals currently trade at a forward P/E of 35.9x (Indian pharma’s – forward P/E: 30.0x). While the Pakistan pharma space broadly appears pricey, we believe companies on a high growth trajectory can support premium valuations. We prefer FEROZ (strong Sovaldi demand) and HINOON (upcoming antibiotics exposure).