Buy Marksans Pharma; target of Rs 55: Centrum

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Centrum's research report on Marksans Pharma

We upgrade Marksans Pharma (MPL) to Buy from Hold rating with a TP of Rs55 (earlier Rs45) based on 18x March’20E EPS of Rs3.0. MPL’s Q3FY18 revenues and EBIDTA were lower than our expectations but net profit was in-line with the expectations. The drug maker’s Q3FY18 revenue grew 2% YoY, EBIDTA margin improved 80bps to 13.3% and net profit grew 72% YoY. The Goa facility was approved by UK MHRA and TGA-Australia. We expect MPL’s performance to improve led by the recent launch of four new products in the US and expected approvals for softgel capsules from US FDA. Key positive trigger to our assumption includes stupendous growth in the US market and key negative risk includes regulatory issues for the Goa facility from US FDA.

Outlook

We have revised our FY18E and FY19E EPS downwards by 3% and 19% respectively. We upgrade MPL to Buy from Hold rating, with a TP of Rs55 based on 18x March’20E EPS of Rs3.0, and a 45.3% upside from CMP. Key positive upsides would be additional ANDA approvals from US FDA and key negative would be regulatory issue with US FDA for its Goa facility.

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