Press Release

VIS Reaffirms Entity Ratings of Highnoon Laboratories Limited

Karachi, January 24, 2025: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Highnoon Laboratories Limited (‘Highnoon’ or the ‘Company’) at ‘A+/A1’ (‘Single A Plus/A One’). Medium to long term rating of ‘A+’ indicates good credit quality; protection factors are adequate. Risk factors may vary with possible changes in the economy. Short term rating of ‘A1’ indicates strong likelihood of timely repayment of short-term obligations with excellent liquidity factors. Outlook on the assigned rating remains ‘Positive.’ Previous rating action was announced on September 20, 2023.

Highnoon was established in 1984 as a private limited company and was listed on the Pakistan Stock Exchange (PSX) as a public limited company in 1995. The Company is a generic pharmaceutical manufacturer that produces and markets a diverse range of products across various therapeutic areas, including Respiratory, Inhalation, Cardiology, and Diabetes. Highnoon also has a significant presence in the anti-infective market through its subsidiary, Curexa Health Private Limited. As of December 2023, the Company ranked as the 12th largest pharmaceutical company in Pakistan, with a market share of 2.55%.

The assigned ratings reflect the low industry risk profile of Pakistan's pharmaceutical sector, marked by stable demand and low economic sensitivity, which supports steady revenue and profitability. Key factors such as population growth, disease prevalence, emerging illnesses, hygiene conditions, and increase in health awareness sustain the demand for pharmaceutical products. Furthermore, the recent deregulation of drug prices for non-essential medicines permits companies to independently increase prices, which were previously regulated, favoring the industry risk further.

The ratings incorporate Highnoon’s diverse therapeutic portfolio, which includes both acute and long-term treatment options, offering a balanced mix of high and low-margin products. The top five brands contribute approximately 31% of turnover, indicating a medium to low concentration risk. The ratings are also supported by consistent sales growth with a Compound Annual Growth Rate (CAGR) of 21.0% over the past five years. However, the gross margin, though remained strong, decreased due to high input costs driven by the impact of rupee devaluation and inflation in CY23. The pressure on margin was subsequently alleviated by the deregulation of non-essential drug prices in early 2024, given that 60% of the Company’s product portfolio consists of non-essential medicines.

The ratings take into account Highnoon’s liquidity profile, supported by a strong current ratio and healthy debt service coverage. However, the net cash cycle remained relatively high during the review period due to the maintenance of a high raw material buffer to manage procurement costs amid exchange rate volatility. The ratings also factor in a conservative capital structure, where despite an increase in debt levels, sustained profit generation has kept gearing and leverage indicators within low levels. Going forward, the ratings remain underpinned by the Company's ability to manage the financial impact of the planned debt mobilization for the new facility, in order to support capacity expansion for future growth prospects.

For further information on this ratings announcement, please contact at 021-35311861-64 or email at info@vis.com.pk

Applicable Rating Criteria: Corporates:
https://docs.vis.com.pk/docs/CorporateMethodology.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS , the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2025 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .