AGP Ltd announces dividend of PKR2.5/sh.

AGP has reported 4QCY21 NPAT of PKR450mn (EPS: PKR1.61), up 8% yoy and a sharp 32% qoq. This takes CY21 NPAT to PKR1.6bn (EPS: PKR5.59), flat yoy. While the 4Q result is better than expected, we attribute this growth to one-off reversal of PKR34mn on finance cost – without which this would have been a weak result. Trade disruptions and border closure in Afghanistan have led to a sharp 24% yoy drop in sales. Recently acquired Sandoz Pakistan has helped fill the gap in sales. Results were accompanied with a final cash dividend of PKR2.5/sh.

4QCY21 Key result highlights:

AGP’s revenue has dropped to PKR1.5bn in 4QCY21, down 24% yoy and 35% qoq. Absence of sales to Afghanistan and lower institutional sales orders are to blame. Revenue from Sandoz Pakistan however remains on track, helping plug the gap.

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AGP has posted gross margins of 63%, likely led by Sandoz and sale of high-margin products. AGP has not witnessed any meaningful exchange rate volatility due to strong inventory buildup, as expected.

SG&A expenses have come off by 27% yoy in line with the decline in sales. Finance costs, on the other hand, have reported a reversal of PKR34mn vs. PKR30mn expense SPLY. This has helped support the bottom-line. AGP has also reported a PKR11mn loss on its other income. We await management guidance on this front.

While this is a weak result by AGP, the impact of suspended Afghanistan operations appears to be largely in the price (AGP’s stock price is down 27% in the last 12 months). Earnings from Sandoz Pakistan remain on track and can only rise from here. We have a TP of PKR105/sh on the stock.

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