Pakistan Pharma Sector Posts 30% Earnings Growth

Pakistan listed pharmaceutical sector started FY26 strongly, posting first-quarter earnings of Rs10.4 billion, marking a 30 percent year-on-year increase in profitability.

The growth is attributed to higher net sales, improved gross margins, and a notable reduction in finance costs across the sector.

Net sales climbed 14 percent YoY to Rs94.0 billion, largely driven by price increases following the February 2024 deregulation of non-essential drugs.

Top-performing companies including ABOT, SEARL, AGP, FEROZ, and HPL led the sector, showing strong sales growth in absolute and percentage terms.

Gross margins improved to 42 percent in 1QFY26, compared to 37 percent in 1QFY25, supported by lower raw material costs and a stable currency.

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AGP recorded the highest margin in the sector at 62 percent, highlighting its efficient cost management and strong pricing power during the quarter.

Finance costs declined 52 percent YoY to Rs1.0 billion due to lower borrowings and a drop in the average KIBOR from 18.5 percent to 11.0 percent.

Sequentially, earnings rose 35 percent quarter-on-quarter, driven by higher gross margins and a one-off SEARL adjustment, Ex-SEARL growth eight percent.

Sector profitability is expected to remain strong as companies prepare to launch new products and benefit from declining API prices following crude oil reductions.

Investors should focus on high-quality pharmaceutical stocks with strong margins, low leverage, and attractive long-term growth potential.

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