Pre-Trading Thoughts

Will EGP flotation trigger drug price revisions?

Thoughts on potential impact on producer sales and FVs

According to local media, Egyptian drug producers intend to officially request for a price increase of at least 50% during their upcoming meeting with EDA to absorb the rise in production costs.

Accordingly, we expect a gradual increase in drug prices to be implemented soon, reflecting a positive impact on pharma market growth as well as producers’ revenues and gross profit throughout 2024. This impact will not reflect immediately, but will be gradual as repricing is approved on several rounds.

Two scenarios for price increases 

•   1st scenario: a minimum of 30% increase in pharma market sales, mirroring pharma market growth in 2023 which was driven solely by increase in ASP

•   2nd scenario: a rise of 50% in pharma market sales, which is the percentage demanded by pharmaceutical companies

-ISPH to benefit the most out of any price increase, whether 30% or 50%, since it is an FX-neutral stock with no direct costs in foreign currency 

- The upside potential in RMDA and PHAR is not meaningful unless the price increase is 50% or more

The World Bank Group (WBG) announced over USD6 billion in support to Egypt over the next three years. The WBG will provide the funding through a comprehensive program that includes USD3 billion for governmental programs and an additional USD3 billion for the private sector.

Egypt’s credit outlook was lifted to positive from stable by S&P Global Ratings, which affirmed the rating at B-.

The EU will disburse some EUR1 billion worth of concessional loans in the short term, Egypt’s ambassador to the EU. The remaining EUR4 billion will be extended in tranches starting the end of this year, he added. The soft loans will come with interest rates of no more than 3% and will be paid over no less than 20 years.

Customers have sold over EGP3 billion worth of foreign currency at the National Bank of Egypt’s foreign currency exchange bureau.

Minister of Finance said that the allocations for health and education are increased by 20% in the FY2024-25 budget despite planned rationalization and fiscal consolidation, adding that subsidies for bread will increase to EGP120 billion up from EGP83 billion in the current budget, while fuel subsidies are estimated at EGP147 billion up from EGP119.4 billion.

The Trade Ministry has extended its ban on the export of sugar for three months. The ban, which runs through June 2024, exempts surplus quantities beyond local market needs and this marks its second extension since December. The government is working with the Central Bank of Egypt to secure the FX needed to import 1 million tons of sugar in order to fill the needs of the domestic market. 

According to local media, the Egyptian Drug Authority (EDA) will hold a meeting next Tuesday to discuss the pharma pricing scheme following the central bank’s decision to float the EGP.

The Ministry of Transportation finalized the allocation of 9.5 million feddans in Suhag and Aswan to investors by the end of last January mainly for launching wind and solar power stations. Among the investors are ORAS, Aqua Power, Nowais, and Masdar.

MASR (FV: EGP5.24, OW) launched Theqa, a property warranty which is designed to substitute maintenance deposits by requiring the customer to pay for maintenance and operation services without any additional increases or differences for up to 20 years upon receipt of the unit. On a separate note, according to local media, MASR is working to acquire a 400 feddan land plot on the North Coast and aims to grow its total land bank to 20,000 feddans.

The Indian Rana Group wants to establish a green hydrogen project in Egypt with USD