Buy Marksans Pharma Ltd for the 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 anticipated 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 17.5%/22.3%/24.5% over FY26–29E and maintain our target price at INR 385, with a ‘BUY’ rating. The valuation remains supported by a PEG of 0.9x
Healthy YoY Growth across Metrics
* Revenue grew 30.5% YoY / 11.8% QoQ to INR 9,402 Mn, (vs. CIE estimate of INR 8,890 Mn).
* EBITDA grew 48.3% YoY / 0.6% QoQ to INR 2,143 Mn; margin expanded 274 bps YoY but contracted 254 bps QoQ to 22.8% (vs. CIE estimate of 24.3%).
* PAT increased 43.9% YoY but declined 10.1% QoQ to INR 1,413 Mn (vs. CIE estimate of INR 1,581 Mn).
Geographic Expansion and Scale-up to Support INR 40 Bn FY28E Vision
MRKS continues to deliver a healthy growth, with the management reiterating its revenue target of ~INR 4,000 Cr by FY28E. We project a revenue CAGR of 17.5% in FY26–29E, driven by the following factors:
* North America and the US: Growth is anticipated to be driven by deeper SKU penetration among existing customers, supported by a strong order book of ~USD 300 Mn over the next three years and sustained traction in OTC products. The company has also incorporated a new entity in Canada, with product filings under way.
* Europe and the UK: Unlike the US, where growth is driven primarily by deeper customer penetration and new product launches, Europe offers opportunities through geographic expansion and acquisitions. We believe the Netherlands acquisition provides an immediate revenue base, contributing ~10% of Europe revenue. Germany and Ireland are projected to emerge as additional growth contributors.
* Australia and New Zealand: The business is transitioning from an OTCfocused portfolio towards branded Rx through the Nova Pharma acquisition. This shift is expected to support stronger and more sustainable growth.
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SEBI Registration no.: INZ 000160131
