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Mankind Pharma Gets 'Outperform' As Macquarie Initiates Coverage

Shares of the pharma company debuted at 20.37% premium at Rs 1,300 apiece on BSE.

<div class="paragraphs"><p>Mankind Pharma Ltd.'s R&amp;D facility. (Source: Official Company Website)</p></div>
Mankind Pharma Ltd.'s R&D facility. (Source: Official Company Website)

Macquarie Research has initiated an 'outperform' rating on Mankind Pharma Ltd. while setting a target price of Rs 1,400.

The company’s net profit could double in the next three years, according to the research firm, driven by continued sales outperformance relative to the Indian pharma market.

Shares of the pharma company debuted at a 20.37% premium at Rs 1,300 apiece on BSE, over its IPO price of Rs 1,080 apiece.

The pharma company IPO was subscribed 15.32 times, with qualified institutional buyers applying for 49.16 times the allotted quota of shares. The portion set aside for high-net-worth individuals was subscribed 3.8 times, and the retail investor part was booked 92%.

Solid Domestic Business

Mankind Pharma derives 98% of its revenue from the domestic pharma market, and within its domestic business, 90% of the revenue comes from prescription pharmaceuticals. The rest comes from the consumer health business, Macquarie said in a May 9 note.

It has one of the largest networks of medical representatives in India, and 80% of doctors prescribe its products, the research firm said.

"We believe growth potential in the chronic segment would likely drive meaningful margin expansion from 22% in FY23e to 28% by FY26e, leading PAT to more than double (from Rs 13 billion in FY23e to Rs 28 billion in FY26e)," Macquarie Research said.

Affordability, Accessibility, And Quality

The company has grown into the fourth-largest domestic pharmaceutical company by addressing affordability, accessibility, and quality through lower pricing, an extensive presence in Class II-IV cities, and in-house manufacturing, the research firm said.

To increase affordability, Mankind Pharma has kept prices lower than peers, and its top 50 brands are, on average, 20% cheaper than the top-three competitors. The company has also built an extensive manufacturing presence in India, with 25 plants to control quality.

Solid Balance Sheet With Attractive Valuation

Mankind Pharma has net cash of Rs 280 crore as of December 2022, with strong cash flow generation. The FY22 return on investment capital is at 30% and the return on equity is at 26%—much better than its domestic peers and in line with MNC peers such as Abbott India Ltd., Pfizer Inc., and GlaxoSmithKline Pharmaceuticals Ltd., Macquarie Research said.

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