Buy Mankind Pharma; target of Rs 2650: Motilal Oswal

Motilal Oswal's research report on Mankind Pharma

Mankind Pharma has agreed to acquire Bharat Serum Vaccines (BSV) for EV of INR136b, implying EV/EBITDA of 28x/22-23x on FY24/FY25 basis.This acquisition not only expands Mankind’s niche portfolio, but also provides a specialty R&D tech platform, in-house complex manufacturing capabilities and strong institutional reach. Considering access to a high-entry barrier business, a healthy mix of domestic-international segments and potential for sustainable EBITDA growth (27% EBITDA YoY growth in FY25), we believe the deal valuation is fair.

Outlook

We await clarity on the deal structure in terms of debt/equity fund raise to fund the deal from the concall scheduled for 26th Jul’24 at 5pm. Having said this, considering current cash of INR42b from internal accruals, we assume debt/equity of INR60b/INR32b to complete the transaction. Free cash generated from the base business would subsequently lower debt for Mankind. Maintain BUY.