AGP Ltd Reinstated with Buy Rating Amid Positive Growth Outlook

Karachi: AGP Ltd has been reinstated with a buy rating and a target price of Rs220 per share, indicating a 48% potential upside from current levels. The optimism is fueled by AGP’s strong growth trajectory, cost optimization strategies, and favorable regulatory conditions.

According to JS Global, AGP is set to achieve a 16% compound annual growth rate in revenue over the next five years, driven by its diverse product portfolio, expanding distribution network, and strategic acquisitions of Sandoz and Viatris. The company is also expected to maintain industry-leading gross margins, averaging 59% over the next five years, compared to a historical average of 55%.

The report highlights that approximately 55% of AGP’s product portfolio is no longer subject to pricing regulations, following the deregulation of non-essential drugs. This regulatory change positions AGP to benefit further from its pipeline of innovative products, including nutraceuticals, thus bolstering its growth prospects.

Despite AGP’s resilient business model and strong financial position, the report flags potential risks, including the devaluation of the Pakistani Rupee and inflationary pressures. With 95% of the active pharmaceutical ingredients being import-based, currency devaluation could impact costs. Additionally, price caps on essential drugs may limit AGP’s ability to pass on cost increases to consumers.

JS Global’s analysis suggests that AGP’s current valuation does not fully reflect its growth potential and superior margins, with a projected price-to-earnings ratio of 12.7x for CY25E and a PEG ratio of 0.35x based on a three-year earnings per share CAGR of 36%.

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