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SEARL_Analyst Briefing Key Takeaways, (AKD Off the Analyst's Desk Dec 08, 2022)

The Searle Company Limited (SEARL) organized its analyst briefing yesterday to discuss FY22 results and the company’s future outlook.

• To recall, SEARL posted consolidated PAT of PkR29.9bn (EPS: PkR7.5), up 14%YoY while on the flipside profit margin for the company dropped to 8.1% vs. 14.3% SPLY. Furthermore, management reiterated that no difference in demand has been observed and units sold during the year remained unchanged.
• With regards to the industry, pharma sector grew by 15.3% during the previous fiscal year, with 97.2% of contribution from the top 100 players from a total of 741. SEARL stands as the 2nd largest company in term of units sold and 5th largest in terms of value, with everyday prescriptions of more than 539,000
• SEARL has 1198 registered products, including 651 local and 398 global registrations, with a portfolio of 80% essential and 20% non-essential products. 46% of the revenue is contributed by the top 10 Brands. Leading brands includes Hydryllin (cough), Nuberol (Muscle Relaxant), and Peditral (ORS).
• Management stated that they haven’t faced any restrictions for imports except for certain delays in the execution of LCs. For now, the company is trying to increase its inventory holding capability to cater with any future delays with regards to LC restrictions. As of now, company’s inventory holding period is 3-4 months.
• Recent rounds of PkR devaluation, inflation, and multiple hikes in the interest rate have negatively impacted the overall profitability of the industry as a whole. Furthermore, recent price increases by the company may not be enough to cater increasing costs. Industry participants are currently negotiating with the authorities with regards to a one-time price increase to ensure future sector sustainability.
• Company majorly imports its APIs from China, India, and Europe. As for paracetamol, company imports the micronized raw material. More recently, the company tested the locally produced API but it failed to comply with the company standards.
• As per management, IPO of Searle Pakistan Limited is in the final stages of process with PSX. The timeline of the IPO is still to be considered and decided upon by the board.
• Progress on the manufacturing agreement with Reckitt Benckiser is in its final stages, trials have been conducted, operations will begin once product stability is established. Management that Reckitt Benckiser’s products will be manufactured in SEARL plants by CY23.