Highnoon Laboratories Ltd (HINOON) held their analyst briefing today to discuss the company’s performance. HINOON reported CY20 NPAT of PKR1.4bn (EPS: PKR41.04), up a sharp 46%yoy. This was achieved by launching multiple new brands to overcome Covid-19 related headwinds faced in 2020 (trade restrictions and stressed relations with India which is the second largest API manufacturer globally).
Key Takeaways from the briefing:
HINOON has consistently outperformed the industry – with sales rising 18%yoy (in PKR terms) during CY20 vs. 10%yoy for the industry. HINOON reported a 12.7%yoy volumetric growth vs. 2.4% for the industry. Pakistan’s pharmaceutical industry now stands at US$3.09bn or PKR501bn, within which HINOON is the fastest growing pharmaceutical company in Pakistan after SEARL.
HINOON has over 140 brands with c. 80% revenue driven from three major segments: Alimentary tract & Metabolism, Respiratory and Cardiology. Its flagship brand Combivair (in the respiratory segment; generic: budesonide) has recently crossed the PKR1bn mark in sales.
HINOON has maintained its growth trajectory, having launched 16 new products in the past 12 months and is now the 13th largest Pharma company in Pakistan as per IQVIA (formerly IMS). The company plans to continue this pace over the next five years and aims to double its existing revenue from PKR10.7bn in CY20. We think this is an ambitious plan, but given HINOON’s excellent track record (5yr CAGR of 16.1% vs. 11.5% for the industry), the new product pipeline should supplement this.
HINOON’s wholly owned subsidiary Curexa Health plans to launch 5th Generation Cephalosporin molecules (not yet launched in Pakistan) by next year. To recall, HINOON announced equity investment in CY15 in Curexa Health which obtained regulatory approval and product registration for its antibiotics business in in CY17 (becoming profitable within its first year). The company reported a topline of PKR460mn and a net profit of PK59mn (c. 13% net margins) in CY20. Ceftro, an antibiotic brand manufactured at Curexa Health, is one of the fastest growing products in the market.
HINOON has not availed the CPI increase in CY20 due to stiff market competition. That said, recent PKR appreciation will help reduce API costs (which account for 90% of the total raw material costs and packaging costs).
DRAP’s notice to the Ministry of Health to prohibit doctors from prescribing brands instead of generics remains a suggestion and is unlikely to affect prescription sales for now.
HINOON has remained stable at the bourse CYTD and trades at a TTM P/E of 14.5x, a 15% discount to its 5-year average P/E of 16.7x.
Courtesy – Intermarket Securities Limited