 "Mankind Pharma makes strong debut; lists 20% premium over issue price")
Mankind Pharma (Mankind) made a strong debut on the bourses on Tuesday, with its shares getting listed at Rs 1,300 -- a solid 20 per cent listing premium over its issue price of Rs 1,080.
Post listing, the stock of the pharmaceutical company hit a high of Rs 1,327 on the NSE in the intra-day trade. At 10:01 am, Mankind shares were quoting at Rs 1,320, 22 per cent higher against its issue price. Around 14 million equity shares have cumulatively changed hands on the NSE and BSE so far.
Analysts maintain a bullish view on the stock and suggest investors to remain invested from a long-term perspective.
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Global brokerage Macquarie too has initiated coverage on the stock with an 'outperform' rating and a target price of Rs 1,400 apiece. The company, the brokerage said, appears to be well positioned to double its profit after tax from Rs 1,300 crore in FY23e to Rs 2,800 crore by FY26.
"Continued sales outperformance to the India market, focus on chronic therapies and improved salesforce productivity are growth drivers. The growth potential in the chronic segment would likely drive meaningful margin expansion from 22 per cent in FY23e to 28 per cent by FY26 ," it said in a note.
In terms of valuations, at the target price (Rs 1,400) Macquarie has valued the stock at 25x, which implies a 20 per cent discount to its MNC peers as these have an option to launch patented products from their global portfolios.
While the target multiple is at a 25 per cent premium to its domestic peers, which it believes, is justified as Mankind derives most of its revenue (98 per cent) from domestic pharma business versus an average of 50 per cent for domestic peers. Mankind's return ratios are additionally far superior to domestic peers, the brokerage said.
Mankind is the fourth largest player in the domestic market with a presence across therapy areas like anti-infectives, cardiac, gastro, respiratory and also in consumer healthcare segments like condoms, acne preparations, emergency contraceptives, pregnancy tests among others.
The IPO had seen strong demand from institutional investors even as the retail quota had remained undersubscribed. The institutional investor portion of the IPO was subscribed nearly 50 times, the high net worth individual (HNI) quota had garnered 3.8 times subscription, while the retail investor portion was subscribed just 92 per cent.
The company sells the Manforce brand of condoms, which has a 30 per cent market share, while its pregnancy test kit Prega News commands 80 per cent of the market.
Mankind benefits from its strong foothold in domestic branded formulations with emphasis on affordable product offerings. At the upper price band, it is valued at 32.5x P/E on annualised FY23E EPS of Rs 33.2.
Analysts at ICICI Securities had assigned 'SUBSCRIBE' rating to the issue on the back of opportunities from its newer acquired products and its plan to backward integrate in its power brands, structural preference for domestic branded formulations among broader healthcare themes.
Mankind derives a significant portion of revenue from operations from a limited number of markets. Revenue from Indian markets amounted to 96.79 per cent in nine months ended Dec 31, 2022.
Antique Stock Broking, meanwhile, believes Mankind's goal of increasing penetration in metro and tier 1 cities will be a challenging task, the company has taken right steps in the direction by creating dedicated divisions for tapping the right doctors for Rx.
"We also don’t see a meaningful drift in margins on account of higher expenditure for gaining market share in metro cities. With likely improvement in business mix towards chronic segment we expect RoCEs and EBITDA Margins to remain healthy in coming years," the brokerage had said in an IPO note.
