Press Release

VIS Reaffirms Ratings of Macter International Limited

Karachi, April 20, 2022: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Macter International Limited (Macter) at ‘A/A-2’ (Single A/ A-Two). The long term rating of ‘A’ signifies good credit quality; protection factors are strong. Risk is modest but may vary with the possible changes in economy. The short term rating of ‘A-2’ signifies good certainty of timely payment; liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small. Outlook on the assigned rating is ‘Stable’. Previous rating action was announced on January 15, 2021.

The assigned ratings incorporate low business risk profile of the pharmaceutical sector in the long run given the relatively non-elastic nature of the demand. Nevertheless, stringent regulatory framework, including dependence on Drug Regulatory Authority of Pakistan (DRAP) for approvals related to launch of new products and pricing increase, tends to create profitability pressures. Moreover, access to raw material is an issue as majority is sourced from overseas with only about 15% of the raw material being locally produced. As a result, a significant portion of the product costing is foreign currency denominated, which exposes pharmaceutical companies to exchange rate risk.
Macter is present across 39 therapeutic segments catered through a range of ~100 products. Although the revenue base depicts product-wise concentration, the same has improved on a timeline. Management launched five new products in FY21 and further new products are in pipeline. The Company maintains a comprehensive sales network covering ~ 33,000 physicians and 35,000 pharmacies. A separate team of 700 field force (FF) officers caters to specialist doctors to enhance the quantum of prescription business.

During FY21, net sales of the Company came in at Rs. 5.1b (down by 7% YoY). This was mainly due to the exceptionally high public tender business in FY20, which receded in FY21. Nevertheless, given change in business mix towards direct prescription sales, gross margins depicted improvement in FY21. In H1’FY22, Macter posted a topline of Rs. 2.5b, being in line with what was posted in SPLY. Gross margins improved further, given further shift in sales mix towards prescription sales.
During H1’FY22, the Company has raised Rs. 1.1bn through right issuance in order to finance debt repayment, working capital cycle, capex and new product launches. Utilization of right proceeds resulted in a decline in overall debt levels, which ultimately improved the gearing of the Company. Cash flow coverage indicators, including FFO/Debt and Debt Service Coverage Ratio (DSCR) have also improved on a timeline. Going forward, FFO is forecasted to remain healthy on the back of anticipated growth in business volumes.
For further information on this rating announcement, please contact the undersigned (Ext: 201) of Mr. Arsal Ayub, CFA (Ext: 216) at 021-35311861-70 or email at .

Javed Callea

Applicable Rating Criteria: Corporate Methodology - August 2021

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