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Target: ₹1,520
CMP: ₹1398.15
Mankind Pharma reported its first quarterly earnings post-listing and it was ahead of our estimates, with revenue growth of 12.4 per cent for FY23 and 18.9 per cent year-on-year (y-o-y) for Q4 FY23.
EBITDA grew 46.3 per cent y-o-y in Q4 FY23 aided by lower other expenses to sales ratio of 22.7 per cent (vs 26.6 per cent in Q4 FY22) leading to an EBITDA margin expansion of 380 basis points y-o-y to 20.3 per cent.
PAT grew 50.2 per cent in Q4 FY23 on the back of a lower ETR of 22.2 per cent (vs 26.7 per cent in Q4 FY22) due to tax benefits from the Sikkim plant. We expect steady double-digit growth momentum over FY23-26 on the back of continued growth outperformance vs IPM.
The company continued its trend of outperforming industry growth and reported a 17.6 per cent y-o-y increase in its domestic revenue during the quarter (vs IPM growth of 14.9 per cent). This was driven by higher growth in chronic segments, which accounted for 35 per cent of domestic revenue in Q4 FY23 vs 33 per cent in FY22.
For FY23, the company’s India growth stood at 11.3 per cent against IPM growth of 7.9 per cent. The acquired portfolio from Panacea has stabilised and its top five brands grew 19 per cent y-o-y in Q4 FY23.
According to the management, FY23 EBITDA margin 380-basis point compression was on account of 130-bp higher raw material costs, 110-bp employee costs, and 60-70 bp integration costs of Panacea assets; capex guidance of ₹600 crore for FY24; and the price increase taken in Q2 FY23 helped offset higher raw material costs.
We expect outperformance in the domestic market to continue with an increasing contribution of chronic products. We expect revenue/EBITDA/PAT CAGR of 12.6 per cent/18.5 per cent/21.9 per cent over FY23-26.
We factor in higher India sales and raise our FY24/25 earnings by 2-3 per cent. We also introduce FY26 estimates. We maintain BUY with a revised TP of ₹1,520 (₹1,500 earlier), based on 30x (unchanged) FY25E earnings.
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