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Sunidhi Research
Mangalam
Drugs (Buy)
CMP: ₹186.35
Target: ₹325
Mangalam Drugs & Organics (MDOL) was incorporated on April 18, 1972 as a private limited company with the name Advent Pharma Pvt Ltd. MODL was established with a view to set up a plant for manufacture of organic and inorganic chemicals. Post restructuring its business in FY12-13 by de-focusing on the commoditised chemical businesses, Mangalam mostly stays committed to tender-based API (active pharmaceutical ingredient) supplies approved by WHO and funded by global funding agencies. Exports constitute 22 per cent of sales.
MODL is one of the largest and most preferred API suppliers for Anti-Malaria drug manufacturing companies in the regulatory market across the world. It has diversified its product range over the last few years from intermediates and specialty chemicals to API’s such as Anti Malarial, Anti Retroviral, Uricosuric Agent, Analgesic and Anti Hypertensive.
MODL is all set to post an EPS of ₹19.6 in FY19E and ₹23.2 in FY20E. We recommend BUY with a target price of ₹325 in the long-term at which the share will trade at a P/E of 14.5x on FY20E.
Key risks: The international business poses challenges such as increased competition, rapidly changing regulatory environment and increasing span of price controls in some markets. However, MODL is optimistic about its good growth prospects.
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