IPO Note : Mankind Pharma By Anand Rathi Share and Stock Brokers
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All set for strong differentiation pipeline. Being the second company to launch Dydroboon (Rs1.5bn sales in FY22), Mankind plans to develop and launch such new chemical entities. GPR119, an anti-diabetic molecule is in phase-I clinical trials. The company is on track to developing several antiallergic and anti-cancer biosimilars.
Focus on acquisitions, expanding its chronic therapies. Sales of chronic therapies (33% of FY22 revenues) clocked an 18% CAGR over FY20-22, outpacing the IPM’s 11%. The recently acquired pharma formulations (transplants, oncology) from Panacea Biotec, and Daffy (derma) & Combihale (respiratory) from Dr Reddy’s would boost growth. Further growth would be led by launches in SGLT2 inhibitors, gliptins, cardiac, anti-epileptic, antidepressant anxiolytics.
Strengthening position in class I cities. Mankind explores potential to grow operations in class I cities (~53% of domestic sales vs the IPM’s 64%), which grew a 22% CAGR over FY20-22 outpacing the IPM’s 10%. This will be strengthened by the recently launched specialty categories in cardiodiabetology, cardio-vasculars, respiratories, transplants, and oncology.
Financials. FY22 revenue grew 25%, volume-driven (17ppts), price hikes (4% ppts) and launches (4ppts), while 9M FY23 growth was 9%. Lower GMs and high costs led to a 23% EBITDA margin in 9M FY23 (FY22: 25.6%). The 9M FY23 EPS slid 20% y/y to Rs25 (FY22: Rs36). FCF was Rs6.3bn in 9M FY23 (vs a negative Rs14.2bn in FY22 due to acquisitions).
Valuation. At the high (Rs1,080) of the issue price band, the stock is valued at ~30x FY22 EPS of Rs36. Pharma companies quote at an average P/E of 25x/22x FY24e/FY25e. We expect the company’s strong set of brands, focused approach to its chronic portfolio via recent acquisitions, launches and differentiated pipeline products to be key positives. Risks: Addition of NLEM lists, rise in raw material prices.
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