Press Release

VIS Reaffirms Entity Rating of Aspin Pharma (Private) Limited

Karachi, November 04, 2024: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Aspin Pharma (Private) Limited (‘APL’ or the ‘Company’) at ‘A/A1’ (‘Single A/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 ratings remains ‘Stable’. Previous rating action was announced on October 04, 2023.

Aspin Pharma (Private) Limited was incorporated as a private limited company on 14 December 2013. The registered office of the Company is situated at Plot No.10 & 25, Sec-20, Korangi Industrial Area, Karachi. The Company is a wholly owned subsidiary of Aitkenstuart Pakistan (Private) Limited (parent company). Principal activities of the Company include import, marketing, export, distribution, wholesale and manufacturing of all kinds of pharmaceuticals.

The assigned ratings reflect the low business 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. Profitability, however, remains under pressure due to price caps, enforced by the Drug Regulatory Authority of Pakistan (DRAP). Additionally, 70-80% of raw materials are imported, exposing companies to exchange rate risks. Nevertheless, the recent deregulation of drug prices for Non-Essential Medicines allows companies to independently raise prices, further supporting the sector's business risk profile.

The ratings reflect APL’s cost-saving measures, including packaging resizing, along with plans for additional efficiencies through in-house production at the new hormonal plant and local sourcing of capsules. These initiatives are expected to reduce procurement and external production costs, thereby supporting margins. On the export front, the Company aims to expand into new regions, leveraging its new hormonal plant to tap into previously unexplored markets. However, portfolio concentration risk persists, though high market shares and strong brand value provide some degree of comfort.

Assessment of financial risk profile reflects stable revenue for CY23, with a slight improvement in gross margins due to a one-time government price increase for essential and non-essential medicines. Despite stable gross profitability in CY23, the bottom line declined, primarily due to elevated marketing and selling expenses. In spite of experiencing revenue growth during the ongoing year, margins remained subdued on account of inflationary impact and elevated finance costs. Nevertheless, APL's liquidity position improved during the period, with a higher current ratio and stronger cashflow coverages. The Company's equity base expanded due to profit retention, and its debt profile showed a reduction in long-term financing owing to debt maturity and repayments. As a result, both leverage and gearing ratios improved. The assigned ratings remain contingent upon APL's ability to maintain its liquidity and capitalization profile.

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 2024 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .