Q2FY24 Review: Mankind Pharma: Q2 likely an aberration

2 Nov 2023 , 02:39 PM

Although Mankind has consistently outperformed IPM growth over the past 10-12 years (barring FY14 & FY19), Q2FY24 was an aberrant quarter with Mankind underperforming IPM growth by 210bps (secondary sales) owing to a delayed acute season. Nonetheless acute segment growth has started picking-up from Sep’23 and mgmt also indicated that Mankind will continue to outperform chronic market growth by 400-500bps p.a. driven by scale-up in metro markets, increasing penetration with specialist doctors, differentiated launches and in-licensing opportunities. Existing cash balance of Rs22bn also provides war chest for M&A opportunities in the chronic & CHL segment. Although analysts of IIFL Capital Services downgrade FY24-26 EPS by 2% to account for the Q2 weakness, they expect Mankind to deliver Revenue/Ebitda/EPS Cagr of 13/21/24% over FY23-26. Mankind (TP Rs2140) and JB Pharma remain their top-picks from the domestic-focused pharma pack. 

Forecast Mankind’s India Rx business to clock 12.5% Cagr: 

Mankind’s India Rx business grew 8% YoY in Q2, as a delayed acute season impacted growth in AI, Respi, Cough/Cold, VMN, Gastro segments. Nonetheless, acute season has started picking-up and Mankind also outperformed chronic market growth by 360bps in H1. While Panacea’s revenue grew 30% in Q2, Dydrogesterone’s new plant got commissioned in Q2 and Mankind will be launching innovative line-extensions for Dydro. With increasing prescriber base & ramp-up of chronic sales in metros, analysts of IIFL Capital Services expect Mankind to outperform IPM growth by 250-300bps over FY23-26. 

CHL portfolio will revert to double-digit growth from FY25: 

Although Mankind’s CHL primary sales growth was muted at 2% YoY in Q2 owing to inventory rationalization & stockist consolidation, the business grew at midteens rate as per secondary data. Mankind is adding a new division in the CHL segment to launch 1 product from Panacea’s portfolio & will also transition ‘HealthOK’ brand from the OTX to the OTC segment. Analysts of IIFL Capital Services expect the CHL business to grow only 7% in FY24 and then 15% in FY25/26 driven by new launches and efforts to premiumize the portfolio. 

Analysts of IIFL Capital Services expect Mankind’s Exports business to grow 5% in FY25 (vs mgmt’s guidance of mid-teens growth), as shortage opportunity in Ofloxacin (Mankind’s MS has increased from 9% to 23% owing to Akorn’s exit) will likely lead to Mankind’s Exports sales more than doubling in FY24 & the company will find it difficult to grow on the high base of FY24.