Mankind Pharma - Improvising The Base; Adding New Avenues For Growth: Motilal Oswal

Motilal Oswal Report

Mankind Pharma Ltd. has a strategic roadmap for growth through expansion in high entry barrier innovative product launches in the chronic/consumer segment and other adjacencies, transitioning from sexual wellness to consumer wellness in the over-the counter space.

During FY22-24, its strategic product launches have focused on chronic therapies such as diabetes, cardiac, gynecology, CNS, and respiratory.  Further, it is implementing efforts to deepen its presence in tier I/ metro cities by engaging with key opinion leaders and forging strategic partnerships with hospitals.

In addition to premiumising products and extensions, Mankind Pharma is expanding in the consumer wellness segment via product launches such as Nimulid.

Due to growth initiatives through both organic and inorganic means, the free cash flow to equity and return ratios have been impacted from FY20 to FY24. However, the cash flow from operation/ Ebitda ratio improved to ~89% during FY24. However, we anticipate an improvement in FCFE during FY24-FY26, with the increased benefits of initiatives implemented over FY22-FY24.

Overall, we expect a 14% earnings compound annual growth rate over FY24-26, fueled by an 11% sales CAGR and a 180 bp margin expansion. We value Mankind Pharma at 42 times 12 months forward earnings to arrive at our target price of Rs 2,760. Reiterate Buy.

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