Mankind Pharma, the maker of Manforce Condoms and Prega News, stands out in the listed Indian pharmaceutical space. While most big drug companies derive a significant chunk of their topline from US sales, Mankind gets about 97 percent of its revenue from India alone.
In the past seven years, Mankind Pharma has consistently outperformed the sales growth of the overall Indian pharma market.
This story has resonated well with investors. Three months after its debut on the exchanges on May 9, the stock has scaled over 30 percent and analysts said there is room for an upside.
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‘What the doctor prescribed’
When Macquarie initiated coverage on the stock, analyst Kunal Dhamesha wrote that Mankind Pharma is ‘just what the doctor prescribed.’ The company has one of the largest networks of medical representatives in India, with about 12,000 professionals, and over 80 percent of the doctors prescribe its products.
Mankind’s India sales of Rs 8,749 crore in FY23 comprised key therapies such as anti-infectives (15 percent), cardiac (13 percent), gastro (11 percent), respiratory (9 percent) and vitamins and minerals (8 percent).
“Unlike other companies, Mankind has a well-diversified therapy mix,” according to foreign broking firm Jefferies.
Pharma makes for 92 percent of the company’s sales. The other 8 percent comes from consumer healthcare. Here, Mankind has brands such as Manforce, Prega News and Acne Star. Manforce Condoms had a 30 percent market share in the male category, while at-home pregnancy testing kit Prega News commands 80 percent of the market.
In the emergency contraceptives category, Mankind’s Unwanted-72 brand has a market share of about 59 percent.
These over-the-counter products are promoted by a combination of celebrities and innovative marketing, resulting in strong brand recall, said analysts. Amitabh Bachchan, Mohanlal and Vijay Sethupathi lead the corporate brand while Sunny Leone endorses Manforce and Anushkha Sharma promotes Prega News. The company launched a new campaign for its HealthOK multivitamin tablets with Ranveer Singh earlier in August.
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Focus on chronic
Chronic therapies accounted for 34 percent of the company’s sales in FY23. The management is betting on this segment to drive the next leg of growth, but has not shared any targets. Macquarie expects the segment’s contribution to increase to over 40 percent by FY26E.
The company is focused on growing the segment through field force expansion, acquisitions and in-licensing. In 2022, Mankind took steps in this direction – it acquired Panacea Biotec Pharma's formulations brands for Rs 1,872 crore and it got its first in-licence heart failure drug from Novartis. It also acquired a dermatology brand (Daffy) and a respiratory brand (Combihale) from Dr Reddy’s Laboratories in February 2022.
According to Jefferies, these steps brought differentiation to Mankind's portfolio and provided it face time with specialist/super specialist doctors in metro cities to promote other brands in its portfolio.
“While the company has adequate presence in the non-metro markets (with 47 percent sales from Class II-IV cities), its covered market share in metros should go up as it expands its chronic products,” said the firm. This will help Mankind expand its margins over 450 basis points to 26.3 percent over FY23-26E.
In consumer healthcare, Mankind is targeting alternative channels such as e-commerce and modern trade. It acquired a 90 percent stake in Upakarma for direct access to consumers in the ayurvedic medicine market.
Analysts said these steps will help improve its field force productivity. Mankind's sales per medical representative stood at Rs 72 lakh in FY23 compared with Rs 66 lakh in FY22.
Valuations
On the back of these prospects, Macquarie expects revenue, EBITDA and PAT CAGRs (FY23-26) of 13 percent, 23 percent and 30 percent, respectively. Jefferies estimates the three metrics will grow at 14 percent, 22 percent and 25 percent, respectively.
The Mankind stock trades at 59 times its trailing earnings, which brokerages said is a bit expensive given the lower valuations of larger rivals including Cipla, Dr Reddy’s, Lupin and Alkem.
While near-term gains might be capped, brokerages maintained their ‘overweight’ ratings on the stock, saying earnings will soon catch up with valuation with several growth triggers in place.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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