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Superior execution in consumer wellness/exports drives beat on 2Q estimates

Integration of BSV under way

* Mankind Pharma (MANKIND) delivered better-than-expected 2QFY25 performance, fueled by a strong revival in growth of the consumer business and continued growth momentum in the exports business.

* MANKIND continues to deliver a better growth rate than the industry in the Rx-prescription business, supported by a niche portfolio and superior execution in chronic therapies. However, this was partly offset by the pricing impact on certain brands and festival/seasonality in acute therapies.

* We tweak our earnings estimates (-3.7%/3.0% for FY26/FY27) factoring in: a) addition of business from the BSV acquisition, b) sustained growth prospects in exports, and c) a scale-up in the consumer healthcare business. We value the stock at 45x 12M forward earnings to arrive at our TP of INR3,140.

* MANKIND is working on multiple growth drivers, such as: a) increasing share of chronic therapies, driving sustainable growth in the Rx segment, b) higher penetration in Tier I/Metro cities, c) expanding offerings/adding distribution models of consumer wellness brands, d) developing digital platforms to enhance doctor-MR engagements, and d) enhancing niche portfolio offerings through inorganic/in-licensing strategies. Accordingly, we model 18% earnings CAGR over FY25-27. Reiterate BUY.

Superior product mix results in improved profitability on a YoY basis

* Sales grew 13.6% YoY to INR30.8b for the quarter (vs. est. of INR30.0b). Domestic business (91% of sales) grew 10.6% YoY to INR28b for the quarter. Prescription business (Rx; 92% of domestic sales) rose 9.8% YoY to INR25.6b. Consumer business (8% of domestic sales) grew 20% YoY to INR2.3b. Exports (9% of sales) improved 57% YoY to INR2.8b, aided by growth in base business supported by the new launches.

* Gross margin expanded by 200bp to 71.6% due to change in product mix and decline in RM prices.

* EBITDA margin expanded 240bp to 27.6% due to lower employee costs/other expenses (down 10bp/30bp as a % of sales) and a higher gross margin.

* Consequently, EBITDA grew 24.5% YoY to INR8.5b (vs. our est. of INR7.9b)

* Adj. PAT was up 30.4% YoY to INR6.5b (vs. our est. of INR6.0b).

* Revenue/EBITDA/PAT rose 13%/18%/24% to INR59.7b/INR15.7b/INR12.2b in 1HFY25. We expect the company’s revenue/EBITDA/PAT to grow 31%/ 49%/4% YoY in 2HFY25 to INR66b/INR18b/INR9.6b.

Highlights from the management commentary

* Management guided a 25-26% EBITDA margin for FY25.

* The company expects ~20%+ YoY growth in BSV’s international markets in FY26, led by increased penetration in existing markets and expansion into newer geographies.

* MANKIND indicated the Panacea portfolio to have the highest EBITDA margin (33%) followed by Rx prescription, exports, and OTC businesses.

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