Mankind Pharma: Focus on outperformance & improving quality

4 Dec 2023 , 12:06 PM

Recommendation: Buy; Target Price: Rs 2140

 

Analysts of IIFL Securities hosted Mankind’s senior mgmt team (Rajeev Juneja, Arjun Juneja, Ashutosh Dhawan) for investor meetings in London. Mgmt reiterated its consistent volume-led and chronic-led outperformance in the India Pharma market by 30-50% and focus to move up the value chain by expanding presence in metro/tier-1 towns, by further increasing its covered market (CVM) presence, and by pursuing M&A opportunities in the Chronic/CHL segment. With efforts to improve chronic revenue share to 40% (from 34% currently) and expand company’s CVM presence by 500bps (from 68% currently) over the next 3-4 years, analysts of IIFL Securities expect Mankind to deliver Revenue/Ebitda/EPS Cagr of 13/21/24% over FY23-26. Continued ramp-up and strong execution in chronic segment will drive consistent margin expansion and analysts of IIFL Securities believe Ebitda margins can improve to 30% over the next 5-6 years vs 25% in FY24. 

Targeting to increase chronic revenue share to 40% in 3-4 years vs 34% currently: 

Mankind’s chronic revenue has clocked 17% Cagr over FY20-H1FY24 vs IPM chronic market growth of 12% Cagr. With 3,500 reps and 8-10 super-specialty divisions added for the chronic portfolio in metro markets over the past 3 years, mgmt expects to continue outperforming chronic market growth by 1.4-1.5x over the next few years. Mankind’s CVM presence has increased from 62% to 68% over FY20-23 and it is expected to further expand by 500bps over the next 3-4 years, led by ramp-up in chronic portfolio in metro markets. 

Analysts of IIFL Securities expect Mankind’s India sales to clock 12.5% Cagr over FY23- 26, driven by 8-10% growth in its acute portfolio and 18-20% growth in its chronic portfolio. In order to further improve quality perception, Mankind will further expand its DMF-API based portfolio from 130 product SKUs currently to more than 200 SKUs over the next 9-12 months (vs overall India portfolio of 1,100 SKUs). Although DMF-API-based products have 300bps lower GMs, these products allow Mankind to differentiate vs peers and gain access to the super-specialist doctor channel. 

Chronic productivity improvement will drive consistent margin expansion of 100bps pa, given Mankind’s newer super-specialty chronic divisions from Mumbai are operating with PCPM of only Rs3-4 lakhs pm vs Rs8-10 lakhs pm for its mass-specialty divisions in Delhi. With the fieldforce expansion in the chronic business largely over, analyst of IIFL Securities expect Mankind’s overall PCPM to improve from Rs6 lakhs pm in FY23 to Rs8 lakhs in FY27.