Q1FY24 Review: Mankind Pharma: Robust execution across all parameters

4 Aug 2023 , 01:50 PM

Analysts of IIFL Capital Services upgrade Mankind’s FY24-26 EPS by 7-10%, driven by 4-6% increase in Ebitda estimates, on the back of Mankind’s consistent double-digit growth in the India portfolio aided by its volume-led outperformance & ramp-up in Chronic therapies, near-term benefit from differentiated ophthalmic products in the US business, operating leverage from strong growth in India/Exports business & improving productivity of India rep team driving margins 50- 100bps higher p.a. vs their earlier expectations. With improving Chronic revenue share and 350-400bps volume outperformance vs IPM, they expect Mankind’s India business to clock 13.5% Cagr over FY23-26. This, along with margin expansion from 22% in FY23 (25% in Q1FY24) to 27% in FY26, should drive 22/25% Ebitda/EPS Cagr over next 3 years. Mankind remains one of analysts of IIFL Capital Services preferred picks among the domestic formulation companies and their TP of Rs2,180 (upside of 15%) is pegged at ~35x 2YF EPS. 

Volume & Chronic-led outperformance to sustain in India: 

Per secondary data, Mankind’s India sales grew at 13% Cagr over FY20-23 vs IPM growth of 10%, with Mankind’s volumes growing at 5.3% Cagr over this period vs IPM volume growth of 1.8%. Mankind’s volume-driven outperformance continued in Q1FY24 as well, which along with 17% growth in the Chronic portfolio, led to Mankind’s India sales growing 14% in Q1. Although CHL segment growth was muted at 8% YoY in Q1, due to the high base of last year, mgmt expects CHL business to grow at 17-18% in FY24. 

Chronic ramp-up in metro markets progressing well: 

Mankind’s Chronic revenue share further increased to 36% in Q1FY24 from 34/35% YoY/QoQ. With the company outperforming Cardiac and Diabetes market growth by ~1,000bps, Cardiac has become the largest therapy segment for Mankind. Efforts to expand the DMF-quality portfolio from 100 SKUs currently by 15-20 new SKUs per quarter, should also help to further rampup the Chronic portfolio in metro markets. Mankind’s recent Insulin Glargine launch has also seen good initial uptake, while clinical trials are ongoing for Insulin Aspart with the launch expected over next 12-15 months. 

Ebitda margins can potentially improve to ~30% in 4-5 years: 

While Mankind has reiterated GM guidance of 68% and Ebitda margin guidance of 24-26% in FY24, analysts of IIFL Capital Services believe that with increasing Chronic revenue share and improving India PCPM (Rs6.9 lakhs pm in Q1FY24 vs Rs6.1 in FY23), Mankind’s Ebitda margins can potentially improve to ~30% in 4-5 years.