Buy Marksans Pharma Ltd For Target Rs.385 by Choice Institutional Equities Ltd
Growth Initiatives Translate into Stronger Earnings Momentum
We continue to maintain our positive view on MRKS as its growth initiatives increasingly translate into financial performance. The company remains on track to achieve its target of INR 40 Bn in revenue by FY28E, supported by continued momentum in the US, robust expansion across Europe and transition towards a branded Rx model in Australia. EBITDA margin is expected to remain in the 21.5–23% range in near-term, supported by improving utilisation at Teva and a favourable product mix. We forecast Revenue/EBITDA/PAT to expand at a CAGR of 17.8%/22.7%/25.9% over FY26–29E and revise our target price to INR 385, with a ‘BUY’ rating. The valuation remains supported by a PEG of 1.0x.
Strong Execution in Key Markets Drives Revenue and Profit Growth
* Revenue grew 35.6% YoY / declined 1.8% QoQ to INR 8,408 Mn, but below CIE estimate of INR 8,881 Mn.
* EBITDA grew 112.8% YoY / 9.0% QoQ to INR 2,130 Mn; margin expanded 919 bps YoY / 251 bps QoQ to 25.3% (vs. CIE estimate of 23.0%).
* PAT increased 173.4% YoY / 7.6% QoQ to INR 1,594 Mn (vs. CIE estimate of INR 1,500 Mn).
Geographic Expansion and Scale-up to Support INR 40 Bn FY28E Vision
MRKS continues to deliver a robust growth across markets, led primarily by Europe and Australia. We expect momentum to remain strong as its growth initiatives increasingly translate into revenue, with the key drivers being:
* North America + US: Growth is anticipated to be driven by increased SKU penetration among existing customers, supported by a strong order book and continued traction in OTC products. In addition, the company has incorporated a new entity in Canada, with product filings currently under way. We expect the region to deliver a revenue CAGR of 19% in FY26–29E.
* Europe + UK: Unlike the US, where growth is primarily driven by deeper customer penetration and new product launches, Europe offers a stronger growth opportunity through geographic expansion and acquisitions. We believe the Netherlands acquisition provides an immediate revenue base, contributing around 12% of EU revenue, while Germany and Ireland are projected to emerge as incremental growth contributors.
* Australia & New Zealand: The business is transitioning from an OTCfocused portfolio towards branded Rx through the Nova Pharma acquisition, which should support stronger and more sustainable growth momentum going forward.
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SEBI Registration no.: INZ 000160131
