Business Recorder
Highnoon Laboratories Limited (PSX: HINOON) was incorporated in Pakistan as a private limited company in 1984 and was converted into a public limited company in 1995. The principal activity of the company is the manufacturing, import, sale and marketing of pharmaceutical and allied consumer products. Pattern of Shareholding As of December 31, 2025, HINOON has a total of 52.983 million shares outstanding which are held by 5558 shareholders. Directors, CEO, their spouse and minor children have the majority stake of 33.61 percent in the company followed by local general public holding 29.20 percent shares. Around 9.41 percent of HINOON’s shares are held by associated companies, undertakings and related parties and 6.83 percent by insurance companies. Joint stock companies account for 5.42 percent shares of HINOON followed by Modarabas & Mutual funds holding 5.34 percent shares. Banks, DFIs and NBFIs have 2.56 percent stake in HINOON. Foreign companies and foreign general public hold 2.099 percent and 1.79 percent shares of the company respectively. Government holdings have 1.089 percent stake in the company while NIT & ICP have 1.05 percent shares. The remaining shares are held by other categories of shareholders. Historical Performance (2019-24) HINOON’s topline and bottomline have posted a steady growth over the period under consideration except for a marginal downtick in its bottomline in 2023. The margins also progressed over the years to reach an unprecedented level in 2022. HINOON’s margins slid back in 2023 followed by a rebound in 2024 and 2025. The company’s margins reached their optimum level in 2025. The detailed performance review of the period under consideration is given below. In 2019, HINOON’s topline posted 20.6 percent year-on-year growth to clock in at Rs.9047.69 million. This mainly came on the back of growth in local sales. Export sales which constituted 5.1 percent of HINOON’s net revenue in 2018 slid to 4.2 percent of its net revenue in 2019 due to insignificant growth posted by the export sales. Export sales were led by sales to Afghanistan which dropped in 2019 while sales to other destination posted an uptick. Higher local sales volume coupled with better sales mix on account of successful innovative product launches during the year kept the GP margin almost intact at 46 percent despite high cost of raw materials and Pak Rupee depreciation. Distribution expense and administrative expense inched up by 16.3 percent and 14.1 percent respectively primarily due to higher payroll expense, advertising and promotion budget as well as trainings, seminars and symposia charges. Other expense also grew by 35.6 percent on the back of higher provisioning done for WWF and WPPF as well as central research fund (CRF). Other expense was largely offset by 157.90 percent rise in other income which was the result of higher returns on deposits coupled with gain on disposal of operating fixed assets in 2019. Operating profit registered 28.21 percent spike in 2019 with OP margin jumping up to 15.1 percent from OP margin of 14.20 percent posted in 2018. Finance cost rose by 185.19 percent year-on-year in 2019 on account of higher discount rate and higher lease liabilities. Net profit posted 33.77 percent year-on-year rise in 2019 to clock in at Rs.971.01 million with NP margin of 10.73 percent versus NP margin of 9.67 percent posted in 2018. EPS also climbed up from Rs.23.07 in 2018 to Rs.28.05 in 2019. In 2020, HINOON’s topline grew by 18.24 percent year-on-year to clock in at Rs. 10,697.63 million. The growth was mainly backed by the expansion of the company’s respiratory portfolio during the year on account of COVID-19. Both local and export sales revenue posted growth in 2020 with export sales constituting 5 percent of HINOON’s topline. Cost control measures put in place by the company are evident by growth of gross profit by 23 percent year-on-year in 2020 despite increase in the prices of imported raw materials due to Pak Rupee depreciation. GP margin swelled up to 47.87 percent in 2020. Distribution and administrative expense registered year-on-year growth of 10.84 percent and 21.15 percent respectively during the period with main growth propellers being payroll expense, advertising and publicity expense, traveling expense as well as trainings, seminars and symposia charges incurred during the year. Higher provisioning for WWF, WPPF and CRF coupled with a significant hike in exchange loss drove other expense up by 49 percent in 2020. Other income registered a decent 21.66 percent growth in 2020 on the back of dividend income from short-term investment and gain on sale of operating fixed assets in 2020. Operating profit attained 42.55 percent growth in 2020 with OP margin further improving to 18.20 percent. Finance cost grew by 0.79 percent in 2020 due to monetary easing. This was despite the fact that the lease liabilities grew during the year. The company also availed SBP refinance scheme for the payment of salaries and wages in 2020. Net profit grew by 46.31 percent to clock in at Rs,1420.74 million with NP margin of 13.28 percent and EPS of Rs.37.31 in 2020. In 2021, HINOON’s topline posted 21.53 percent year-on-year rise to clock in at Rs. 13,000.78 million. This was driven by both local and export sales growth. During the year, the company launched eight new products that further enriched its product portfolio and contributed a great deal to the sales growth. With efficient sourcing and supply chain management, well organized working capital management and robust sales, the company was able to drive its gross profit up by 25.28 percent year-on-year in 2021 with GP margin growing up to 49.35 percent. Distribution expense posted a steep 29.14 percent spike in 2021 which was primarily the effect of a hefty payroll expense of sales force coupled with higher promotion and advertising expense which was in line with new product launches. Administrative expense grew by 18.50 percent year-on-year in 2021 as the number of employees grew from 1825 in 2020 to 2315 in 2021 which pushed up the payroll expense. Higher provisioning done for WWF, WPPF, CRF and ECL also culminated into 19.61 percent hike in other expense in 2021. This was largely offset by 56.87 percent year-on-year rise in other income which was the result of dividend income on short-term investments earned in 2021. Operating profit grew by 23.75 percent year-on-year in 2021 with OP margin setting a new benchmark of 18.52 percent. Despite monetary easing scenario prevailing in the country in 2021, HINOON’s finance cost jumped up by 49 percent year-on-year in 2021. This was due to increased outstanding liabilities. However, since HINOON had a very low gearing ratio of 7 percent in 2021 which grew from 2 percent in 2020, its finance cost stayed at less than 1 percent of its sales in all the years under consideration. Net profit grew by 27.26 percent year-on-year in 2021 to clock in at Rs.1808.03 million with NP margin of 13.91 percent and EPS of Rs.43.17. The upward trajectory of HINOON’s topline continued with further 21.65 percent growth recorded in 2022. This pushed up the topline to Rs.15,815.94 million in 2022. The company made 6 new product launches in the primary care and specialized segments. Furthermore, its export sales posted tremendous 42 percent rise in 2022 which was the result of an increased foothold in the African region. Increased sales to Afghanistan and Iraq also played a pivotal role in attaining a robust growth momentum in the overall sales of HINOON during the year. Despite high raw material prices due to Russia Ukraine crisis which was further exacerbated by steep depreciation of Pak Rupee, the company, with its effective cost planning and control, was able to attain 25.17 percent growth in gross profit with GP margin attaining the highest ever mark of 50.77 percent in 2022. Distribution and administrative expense grew by 16.75 percent and 15.77 percent year-on-year respectively in 2022 which were in line with higher sales volume which resulted in an increased workforce requirements and hence higher payroll expense. Moreover, higher advertisement and promotion budget for market penetration of new and existing products also contributed a great deal to drive up operating expenses in 2022. Other expense grew by 50 percent year-on-year in 2022 on account of higher provisioning done for WWF and WPPF while other income grew by 87.51 percent year-on-year in 2022 due to sizeable increase in dividend income. Operating profit multiplied by 41.19 percent year-on-year in 2022 with OP margin jumping up to 21.50 percent. HINOON’s gearing ratio significantly grew from 7 percent in 2021 to 13 percent in 2022. This was due to high amount of working capital related borrowings obtained by the company in 2022. Higher borrowings coupled with higher discount rate translated into 51.41 percent hike in finance cost in 2022. This coupled with the imposition of super tax during the year somehow diluted the bottomline growth. HINOON’s bottomline grew by 33.69 percent year-on-year in 2022 to clock in at Rs.2417.17 million with NP margin of 15.28 percent and EPS of Rs.45.62. Until 2022, HINOON was able to record significant growth in its margins despite the disastrous effect of inflation, Pak Rupee depreciation, cost of borrowing and taxation through innovative product launches, increased product penetration and growing foothold in the export market. However, it appears that the company gave in to external vulnerabilities in 2023. This is evident by the fact that its margins diluted during the year despite sales growth of 22.81 percent year-on-year in 2023. HINOON’s net sales were recorded at Rs.19,424.25 million in 2022. Topline growth is attributable to right product mix and upward revision in the prices in line with CPI as allowed by Drug Regulatory Authority of Pakistan. However, high commodity prices coupled with Pak Rupee depreciation resulted in 30.62 percent higher cost of sales in 2023. Gross profit grew by 15.25 percent in 2023, however, GP margin tumbled to 47.64 percent from its peak of 50.77 percent in 2022.Distribution expense grew by 24 percent in 2023 due to higher payroll expense as well as elevated advertising & promotion budget. Administrative expense grew by 16.1 percent year-on-year in 2023 due to inflation induced revision in salaries which drove up the payroll expense. This was despite the fact that HINOON’s workforce shrank from 2382 employees in 2022 to 2295 employees in 2023. Other expense ticked up by 4.5 percent in 2023. The company incurred hefty exchange loss in 2023. However, it was largely offset by no provisioning done for ECL in 2023. Other income plummeted by 36.13 percent in 2023 due to drastic fall in dividend income and lesser liabilities written back during the year. HINOON’s operating profit posted a marginal 1.15 percent uptick in 2023 with OP margin falling down to 17.70 percent. Finance cost multiplied by 150.87 percent in 2023 due to unprecedented level of discount rate as well as increased lease liabilities and long-term loans outstanding at the end of the year. HINOON’s gearing ratio surged to 25 percent in 2023 from 20 percent in 2022. Net profit slumped by 0.59 percent in 2023 to clock in at Rs.2403.014 million with EPS of Rs.45.35 and NP margin of 12.37 percent. HINOON’s net sales posted year-on-year growth of 19.41 percent in 2024 to clock in at Rs. 23,195.15 million. This was on the back of continued focus on key brands and efficient sales mix. Cost optimization put in place by the government and the company’s ability to revise the prices of non-essential drugs resulted in 28.92 percent higher gross profit in 2024 with GP margin attaining its highest level of 51.43 percent. Distribution and administrative expenses multiplied by 17.43 percent and 11.62 percent respectively in 2024. This was mainly the result of inflationary pressure as well as investment in new product portfolios. Employees were streamlined to 2263 in 2024. Other expense mounted by 53.31 percent in 2024 due to increased provisioning done for WWF, WPPF, CRF, ECL and sales tax refundable. Other expense was greatly offset by 121.91 percent higher other income recorded by HINOON in 2024 due to realized and unrealized gain recognized on short-term investment, higher return on deposits, gain on sale of fixed assets as well as scrap sales. HINOON’s operating profit improved by 52.17 percent with OP margin jumping up to 22.56 percent. Finance cost escalated by 188.62 percent on the back of monetary tightening and increased short-term borrowings to meet working capital requirements. HINOON’s gearing ratio slid to 17 percent in 2024 from 25 percent in 2023 due to improved bank & term deposits and equity which diluted the gearing ratio. Net profit strengthened by 35.39 percent to clock in at Rs.3253.500 million in 2024 with EPS of Rs.61.41 and NP margin of 14 percent. Recent Performance (2025) In 2025, HINOON’s net sales strengthened by 11.18 percent to clock in at Rs.25,789.24 million. This came on the back of product diversification, efficient sales mix and pricing flexibility for non-essential medicines allowed by DRAP. This coupled with cost optimization resulted in 18.42 percent growth in gross profit in 2025 with GP margin attaining its optimum level of 54.78 in 2025. Distribution expense surged by 8.68 percent in 2025 due to higher advertising and promotion budget allocated for the year. Administrative expense escalated by 29.21 percent in 2025 primarily on account of higher payroll expense, increased donation, elevated rent, rates and taxes and greater depreciation expense incurred in 2025. R&D expense also increased by 13.97 percent in 2025. Higher provisioning done for WWF and WPPF was offset by lower allowance booked for ECL and reversal of provisioning previously done for ECL. This resulted in a marginal 0.28 percent uptick in other expense in 2025. Other expense was largely offset by 3.33 percent higher other income recognized in 2025 which was the result of realized and unrealized income recorded on short-term investment and royalty income received from subsidiary and associate companies. HINOON’s operating profit improved by 28.13 percent in 2025 with OP margin climbing up to 26 percent. Finance cost shrank by 69.15 percent in 2025 due to monetary easing and lower outstanding borrowings at the end of the year. The company paid off its short-term liabilities in its entirety in 2025. HINOON posted net profit of Rs.4119.312 million in 2025, up 26.61 percent year-on-year. This translated into EPS of Rs.77.75 and NP margin of 15.97 percent in 2025. Future Outlook HINOON is putting its best foot forward by launching new and innovative products to diversify its sales mix and by undertaking marketing and promotional campaigns to make them recognized and accepted in the market. It is also embarking on cost optimization and operational efficiencies to strengthen its margins and bottomline. Deregulation of drug prices has also buttressed the margins of pharmaceutical companies across the sector. Expansion in export sales and streamlining of finance cost are other strategies put in place by HINOON to improve its financial performance. On February 02, 2025, the company made a disclosure via public notice on the PSX website announcing potential acquisition of a company to enhance its product portfolio, operational performance, commercial performance and geographical footprint.
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