Highnoon Laboratories (PSX: HINOON) has been having a pretty good year; for the nine months ended 2016, the pharmaceuticals sales have grown by 17 percent year-on-year, while the bottomline showed an increase of 15 percent.
Highnoon predominantly operates in the domestic market and does not have a consumer healthcare portfolio, which makes its growth all the more impressive. The price increase allowed under DRAP's drug pricing policy was made effective from July 01, 2016. As per the Director's Report, the company managed to increase the prices of some of its products henceforth, while claiming that the rise in prices allowed under the policy was not enough to cover increasing input costs.
The company also reported downward renegotiation of toll rates with one of its leading toll partners during the third quarter. So, gross margins inched lower by around 200 bps year-on-year in the third quarter, while staying more or less flat for the nine-month period. Up until the half-year ended, the company had reported higher margins a result of "increased sales and better management of resources," as per the Director's Report of that period. Now it seems that the costs are catching up with Highnoon.
The increase in distribution, selling and promotional expenses was attributed to an increase in the size of the sales team to improve market penetration.
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