Add Marksans Pharma Ltd For Target Rs. 210 By Choice Broking Ltd
US and EU Market Headwinds Drive Near-Term Growth Slowdown
The company’s near-term outlook has softened due to changing market conditions, including looming tariff threats and generic pricing pressure in the EU market. While the overall pipeline remains healthy, growth is expected to slow. EBITDA margin is expected to remain flat in FY26E, impacted by higher integration expenses and the slow scale-up of new launches.
That said, any minimal tariff imposed could be passed on to clients, with little to no material impact on the company. We have revised our earnings estimates downward by 17.4%/21.4% for FY26E/FY27E and now value the company on the average of FY27E and FY28E EPS. We have lowered our PE multiple to 18x (from 22x) to reflect the sharp slowdown in near-term growth expectations, resulting in a revised target price of INR 210 (from INR 315). Our rating is reduced to ADD.
Weak Quarter on EU & UK Decline; Sharp Miss Across Metrics
? Revenue grew 5.0% YoY / declined 12.5% QoQ to INR 6.2 Bn, led by a sharp drop in EU & UK markets (vs. CIE estimate: INR 7.14 Bn).
? EBITDA fell 22.0% YoY / 20.4% QoQ to INR 1.0 Bn; margins contracted 560 bps YoY / 160 bps QoQ to 16.2% (vs. CIE estimate: 19.7%).
? PAT declined 34.6% YoY / 35.9% QoQ to INR 0.58 Bn (vs. CIE estimate: INR 0.99 Bn)
US & EU Outlook Weakens on Tariff & Pricing Pressure
US and EU together contribute ~86% of revenue. Given the current tariff scenario in the US and pricing pressures in the EU, management has guided that it will fall short of its earlier target of achieving INR 300 Bn in revenue by FY26E
? US: The company maintains a healthy order book, though the bulk of the impact will be visible in FY27 revenues. The US market, being more OTCfocused, offers relatively better pricing insulation compared to Europe. However, with the prevailing tariff threat, we have revised US growth to low teens (from 25%+ earlier).
? EU: While Q1 is typically seasonally weak, this quarter saw an abnormally sharp drop due to pricing pressure and inventory dumping by certain players amid tariff concerns. Management expects FY26 to be broadly flat for the EU market, with gradual improvement thereafter, supported by new launches and easing pricing pressures
EBITDA Margins to Remain Flat in FY26 Amid Cost Pressures
While gross margins improved on the back of softening raw material prices, EBITDA contracted steeply due to higher employee costs and sustained pricing pressures. Management expects FY26E EBITDA margins to remain flat YoY, with some expansion anticipated in FY27 as new product launches scale up.
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SEBI Registration no.: INZ 000160131
