1. AGP Limited Corporate Briefing Session 08th August 2019

2. Table of Contents Financial Performance Jan-Jun-19
Analysis of Variances in Half Year Profit & Loss
Financial Performance
Corporate Information & Structural Changes
Pharma Sector Overview
Regulatory and Pricing Environment and Updates
Imports from India in Recent Times
Challenges & Future Outlook
Note:
Actual results may vary from any forecast / expectations / opinions which may have been shared in this presentation / session.

3. AGP Limited – Financial Performance Jan-Jun-19
AGP limited (“AGPL”) posted net profit of PKR 743 Mn for the period of Jan-Jun translating into EPS of PKR 2.65
Interim dividend of PKR 1.25/share
Revenue grew by 10.2% in 1st half 2019.
Ignoring the impact of a one-off government order, sales grew by 20%, of which 8.2% is volumetric increase
The company’s Gross Margin improved to 58% (55% last year)
Revenue Growth
10.2%
23%
22%
Net Profit
Margin
Return on
Equity
Specialty Areas
GYNAE
Gynae / Orthopedic / Antibiotic Products / Pain management / Complimenting Nutraceuticals
PAEDS
Antibiotics for children/Anti-asthmatic/Nutraceuticals
INTERNAL MEDICINE
General GP/ GNT / Broad-Spectrum Antibiotics / Antiallergens
CARDIO-METABOLIC-NEURO
Cardio, Diabetes and Neuropsychiatry products
ANTI VIRAL
Hepatitis treatment (Mylan licensed)
ONCOLOGY
Breast cancer treatment (Mylan licensed)
Revenue Growth (PKR mn)

4. Analysis of Variances - Profit & Loss Jan-Jun-19 (PKR in Mn)
Remarks
Sales
3,159.3
2,866.3
10%
With an overall growth of 10.2%, the growth in Q1 was 4% and 19% in Q2.
Ignoring non-recurring sales (of PKLI in 2018 and similar tender sales in 2019) the sales grew by 20%.
The volumetric increase stood at 8.2%.
Gross Profit
1,836.7
1,580.8
16%
Gross profit percentage improved mainly due to change in product mix. The devaluation impact was partially mitigated by the one-off price increase of 15% allowed by DRAP.
GP %
58.1%
55.2%
EBITDA
1,084.0
943.0
15%
Despite the significant inflationary impact (8.9% on YOY basis) and other increases in operating expenses (admin expenses due to listing, increase in marketing expenses due to new teams etc.), the company posted a healthy increase of 15% in EBITDA and 14% in Operating profit vs. 10% increase in sales.
EBITDA %
34.3%
32.9%
Op Profit
1,022.0
895.6
14%
OP %
32.3%
31.2%
PBT
914.8
801.4
Devaluation leading to higher exchange loss (PKR 10Mn) and increase in finance cost of Sukuk Loan by PKR17.5 Mn due to higher markup rate were major expense variances - the base rate for AGP borrowing increased from 10.96% in Dec-18 to 13.91% in Aug-19
PBT %
29.0%
28.0%
Tax
171.7
124.9
38%
The increase in PBT lead to a net tax increase of PKR 26 Mn (net of listing tax credit). Furthermore, prior year tax expense of PKR 31 Mn was recorded during the period. Resultantly, the effective tax rate has increased to 18.8%
Effective Rate
18.8%
15.6%
PAT
743.1
676.5
The PAT percentage was maintained at 23.5% even in this challenging macro environment.
PAT %
23.5%
23.6%

5. Financial Performance
Amount in PKR '000
Dec-16 (12M)
Dec-17 (12M)
Dec-18 (12M)
Income Statement
Revenue
4,205,750
4,724,990
5,382,055
Gross Profit
2,460,112
2,874,392
3,040,649
EBITDA
1,634,426
1,718,688
1,724,078
Operating Profit
1,528,879
1,610,235
1,625,558
Profit After Tax
1,087,081
1,233,904
1,206,690
Balance Sheet
Non Current Assets
6,804,379
6,874,933
7,095,279
Current Assets
1,708,624
1,651,904
1,868,111
Total Assets
8,513,004
8,526,836
8,963,390
Share Capital
2,800,000
Total Equity
4,277,031
5,510,935
6,367,625
Non Current Liabilities
2,257,643
1,713,826
1,251,152
Current Liabilities
1,978,330
1,302,075
1,344,613
Ratios
Gross Margin
58.49%
60.83%
56.5%
EBITDA Margin
38.86%
36.37%
32.0%
Net Margin
25.85%
26.11%
22.4%
Earnings Per Share
3.88
4.41
4.31
Dividend Per Share -
1.25
Breakup Value Per Share
15.28
19.68
22.74
Current Ratio
0.86
1.27
1.39
Debt Equity Ratio
0.79
0.39
0.26
Return on Assets
12.90%
14.48%
13.8%
Return on Equity
29.12%
25.21%
20.3%
Jun-19 (6M)
3,159,327
1,836,699
1,084,008
1,022,028
740,787
7,324,061
2,027,352
9,342,278
2,800,000
7,108,413
1,001,943
1,241,057
58.1%
34.3%
23.5%
2.65
1.25
25.39
1.63
0.21
16.2%
22.0%

6. Rigix has crossed PKR 1 Bn brand in latest IMS report
Rigix – Billion Rupee Brand
CAGR of 19%
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Price Growth
0.0%
5.5%
10.4%
1.1%
3.2%
13.2%
Units Growth
8.4%
13.6%
19.3%
19.7%
6.2%
16.4%
14.7%
21.4%
21.3%
Growth
11.7%
26.8%
22.5%
24.6%
34.4%
Rigix has crossed PKR 1 Bn brand in latest IMS report
* Sales are Ex-Distributor (Local) at Trade Price (in PKR Mns)
Source : IMS Q2-2019

7. AGP Limited - Pattern of Shareholding in Jun-19
AGP – Corporate Information
AGP Limited - Pattern of Shareholding in Jun-19
AitkenStuart Pakistan (Pvt.) Limited %
Tariq Moinuddin Khan %
Muller & Phipps Pakistan (Private) Limited 13.54%
Baltoro Growth Fund %
Aspin Pharma Limited %
High-Q Pharmaceuticals (Private) Limited %
Bank Alfalah Limited %
General Public & Institutions %
Board of Directors
Tariq Moinuddin Khan Chairman
Nusrat Munshi CEO & Executive Director
Kamran Nishat Director (Muller & Phipps)
Mahmud Yar Hiraj Director (Baltoro)
M. Kamran Mirza Director (AiktenStuart)
Naved Abid Khan Independent Director
Zafar Iqbal Sobani Independent Director
Sharia Compliance
Entity Rating
Meezan Bank Limited have reviewed the accounts of AGP and found them to be in compliance with Karachi Meezan Islamic Index – 30 Criteria set out by Pakistan Stock Exchange
Entity Rating:
Long-Term A+ (Upgraded May-19)
Short-Term A1
Outlook Stable
“The ratings reflect AGP's strong business fundamentals. The pharmaceutical industry has witnessed a higher rate of sustained growth over the years. While product pricing has been a challenge, the new CPI-linked pricing criteria has allowed an increase in prices with respect to inflation, indicating a positive sign. At the same time, AGP's core profitability is strong; any downward revision in margins must remain range-bound.”
Extract from PACRA’s Rating Report May-19

8. Pre Scheme of Arrangement Existing Group Structure
AGP Ownership Structure
For the purposes of better organizational management and pooling of business risks, scheme for rearrangement, restructuring and reorganization of OBS group was undertaken.
Under the Scheme of Arrangement sanctioned by the Court, shares of AGP Limited held with OBS Pakistan (Private) Limited have been amalgamated with and into AitkenStuart Pakistan (Private) Limited.
Consequent to the above, it is pertinent to mention that the ultimate beneficial ownership of AGP Limited remains the same. 
Pre Scheme of Arrangement
Existing Group Structure
West End 16 Pte. Ltd.
(Singapore)
50% Mr. Tariq Khan
50% Mrs. Adeela Tariq
West End 16 Pte. Ltd.
(Singapore)
50% Mr. Tariq Khan
50% Mrs. Adeela Tariq
70% Ownership
70% Ownership
OBS Healthcare (Pvt.) Ltd.
OBS Healthcare (Pvt.) Ltd.
30% Mr. Tariq Khan
30% Mr. Tariq Khan
90% Ownership
100% Ownership
OBS Pakistan (Pvt.) Ltd.
10% Mr. Tariq Khan
AitkenStuart Pakistan (Pvt) Ltd
50.53% Ownership
50.53% Ownership
AGP Limited
0.21% Mr. Tariq Khan
4.79% Aspin (Associate)
44.47% Others
AGP Limited
0.21% Mr. Tariq Khan
4.79% Aspin (Associate)
44.47% Others

9. Sector Overview
Compound Annual Growth Rate (CAGR) of total Market over last 5 years (Jun-19 vs Jun-15) in PKR is 13.1%
Total 12 months Pakistan Pharma Market:
Total revenue in PKR – 423 Billion
Share of local manufacturers in Pakistan is 69%
Total growth June-2019 MAT Basis (PKR) – 13.23%
AGP Growth as per IMS – 17.1%
Pharmaceutical spending of the country stands at c. USD 13 per capita, which is low compared to regional countries average of USD 35 per capita and global average of USD 144 per capita (Source : IMS)
Overall expenditure in the country on healthcare also lags behind the region at US$ 40 per capita vs. Regional average of US$ 76 per capita (Source : World Bank Group)
Sales in PKR Bn
Growth +/-
Source :
IMS Q2-2019

10. Major Industry Players
The top 10 corporates all have annual sales more than PKR 10 Bn and collectively have a ~39% share of the industry’s revenues.
Top 25 corporates, in terms of revenue and growth rate, are shown below in the bar diagrams. They contribute around 62.6% of the total market share
Sales in PKR Bn
AGP Limited stands at 23rd position with revenue of around PKR 5.3 Billion (excluding institutional sales and exports).
Source: IMS Q2-2019
Revenue at trade price includes ex-distributor sales only and excludes institutional sales and exports

11. Regulatory and Pricing Environment and Updates
Pharma Industry operates in a heavily regulated environment, stringent and closely monitored and administered by Drug Regulatory Authority of Pakistan (DRAP).
New molecules can take up to months to register and generics take up to 3 years. Slow registration processes and bottlenecks are hindering new product launches.
Although Pharma companies are contributing 1% of their PBT to government for conducting R&D, much of this is going towards meeting administrative expenses of DRAP rather than R&D
Resolve is needed on the part of the government to end the counterfeit menace which is believed to be as high as 45%
Pricing matters have been addressed to some extent through a revised pricing policy.
The Drug Regulatory Authority of Pakistan (DRAP) has granted a one-off price increase of 15% in Jan-19 to mitigate the impact PKR devaluation of 26% in 2018.
DRAP concluded the proceedings on all hardship case and applying the Drug Pricing Policy issue in June AGP had 6 hardship cases, of which 5 were decided in AGP’s favor.
Subsequently, at the request of DRAP and in the interest of the patients, AGP voluntarily forfeited a around 1/3rd of the increase granted for 2 products (Magnus and Kefzol).

12. Imports from India in Recent Times
In light of the emergent strained relationship with India, AGP at the beginning of the current year undertook a detailed analysis of its supplies from India. Findings are as under:
Raw Materials:
Currently, 24% of raw materials (in value) are imported from India which is approximately 11% of total COS of 2019
AGP maintains 45 days of finished goods inventory with the distributor, 15 days of finished goods inventory at the warehouse and 90 days of raw material inventory, to mitigate the risk of material shortages due to short term disruptions.
AGP has already developed alternative sources for 80% of the raw materials currently imported from India. Alternative sources for the remaining are under developmental phase. In the event that we need to shift to alternative sources, our gross margins will fall by 1.3%.
Finished Imports
AGP currently imports Mylan products from India. Mylan has agreed to supply through alternative routes, if necessary. AGP currently has 6 months of average inventory for Mylan products

13. Challenges & Future Outlook
The Pak Rupee has seen a devaluation of over 15.6% since December 2018 while key interest rates are increased by 325 basis points since January We believe that this pattern may continue in the short term with lower and slower intensity. The devaluation and inflationary impact is partially mitigated by the annual price increase linked to CPI index
The Company is moving to import in Chinese Yuan to manage the devaluation impact.
AGP launched 8 new products in 2018 and has plans to launch at least 4 new products in the second half of 2019.
The Company is pursuing to aggressively expand its product offerings in the growing segment of the Nutraceutical market.
Construction of new office building is also in progress and is expected to be completed in the first quarter of 2020, making space for future plant expansion at plant 1.
Spending on pharmaceutical drugs remains low compared to our International counterparts and the regional average, paving way for growth prospects.
The Company remains optimistic about the future outlook of the business given the essential nature of the industry, internal economies of scale, strength and growth of current product mix along with a strong new product pipeline.

14. Challenges & Future Outlook - Nutraceutical Plant
Nutraceuticals is a growing segment with several players entering the market in the recent past. It is a relatively less regulated segment with market forces determining product pricing
With 2 years of experience in this segment, AGP has witnessed a fair contribution to top line from the sale of products such as Novafol, Cofif Syrup range, All-D Drops, Carodek and Protégé Sachets
During the half year ended, the Company purchased of an existing Nutraceutical product manufacturing facility as opposed to the previous plan of building a new plant. This will lead Company to an early entry in the market resulting in saving valuable time of months, mitigate foreign exchange exposure risk and lead to possible savings in capital expenditure.
AGP is already marketing nutraceutical products through 3rd party tolling and will shift to own manufacturing once the plant is commissioned and operational. AGP has plans to launch at least 3 new products in the next 12 months. The estimated total cost is of PKR 220 million versus PKR 250 million for building the facility.

15. Q&A Thank you