Pakistan listed pharmaceuticals sector’s earnings were up by 30% YoY to Rs 10.4 bn in 1QFY26

Topline Pakistan Research has released a report on Pakistan Pharmaceuticals and noted that the listed Pharma Profit was up 30% YoY in 1QFY26, and likely Momentum continued with improved margins. Pakistan listed pharmaceuticals sector’s earnings were up by 30% YoY to Rs 10.4 bn in 1QFY26. This jump in profitability is primarily attributed to higher net sales, improved gross margins, and a decline in finance cost.

Net sales increased by 14% YoY to Rs. 94.0 bn in 1QFY26, mainly led by an increase in drug prices following the deregulation of non-essential drugs in February 2024. ABOT, SEARL, AGP, FEROZ, and HPL led the sector, showing strong sales growth in absolute terms.

This price increase led to an improvement in gross margins, rising to 42% in 1QFY26 from 37% in 1QFY25 and 41% in 4QFY25. Additionally, the decline in raw material prices and the stable currency further contributed to the increase in gross margins. AGP recorded the highest gross margins of 62% in 1QFY26.

The sector’s finance cost also declined by 52% YoY to Rs 1.0 bn in 1QFY26 amid a drop in the average KIBOR (benchmark lending rate) from 18.5% in 1QFY25 to 11.0% in 1QFY26, along with lower borrowings.

On a sequential basis, earnings increased by 35% QoQ, mainly due to an improvement in gross level coupled with a one-off adjustment in SEARL. To highlight, Ex-SEARL pharma growth remained at 8% QoQ.

Outlook:

We believe that the Pharma profitability will continue to remain strong as companies are now in the phase of launching more new products. Furthermore, the decline in API prices following the drop in crude oil prices will also support the sector’s gross margins.

We prefer high-quality stocks with a higher non-essential product mix, low leverage, strong gross margins, and attractive valuations.

In our strategy report released on November 8, 2025, we mentioned two pharma stocks as alpha stocks, namely GlaxoSmithKline Pakistan Limited (GLAXO) and Highnoon Laboratories Limited (HINOON).