It was a strong debut for Mankind Pharma on May 9 as the counter zoomed 20 percent on the first tick itself before rallying a further 5 percent. Analysts believe you should not sell the stock as of now as the outlook is positive.
Despite being an offer-for-sale by shareholders, the issue got a bumper subscription. Thus, before the listing, the market participants were expecting a strong start of its journey in the secondary market.
“We recommend holding the stock for the long term as the company’s domestic sales are growing at 1.3 times the growth rate of the Indian pharmaceutical market,” said Astha Jain, Senior Research analyst at Hem Securities.
“Mankind has several products in its portfolio within the top 10 rankings across key therapeutic areas along with established consumer healthcare franchises with brand recall. The company has a pan-India market and distribution coverage with focus on affordability and accessibility.”
The company is almost entirely focussed on India. The domestic market contributed 97.60 percent to its revenue from operations in FY22, which recorded a 12 percent CAGR between FY18 and FY22 and 15 percent between FY20 and FY22, while the consumer healthcare products business accounted for 10 percent of domestic sales.
Narendra Solanki, Head- Equity Research Anand Rathi Shares & Stock Brokers, pointed out that being one of the largest domestic pharma companies in India, Mankind is further strengthening its position in class 1 cities. This will be firmed up by the recently launched specialty categories in cardio-diabetology, cardio-vasculars, respiratories, transplants, and oncology. “Growth runway looks impressive for the company,” he said.
At the issue price, the stock was valued at 30x FY22 earnings per share of Rs 36. A cursory analysis shows pharma companies quote an average P/E of 25 times and 22 times FY24 and FY25 expected EPS.
“We expect the company’s strong set of brands, focused approach to its chronic portfolio via recent acquisitions, launches and differentiated pipeline products to be key positives. The IPO is fully priced currently and investors getting allotment could continue to hold for long-term returns,” Sonalki said.
Hemang Jani, Head of Equity Strategy, Motilal Oswal Financial Services, is also bullish on the stock. He said that given its healthy financial track record, domestic focus and extensive network, Mankind is likely to continue doing well, though there are some who believe it is not entirely a bad idea to book profits, given market conditions and its valuations.
Prathamesh Masdekar, Research Analyst, Stoxbox, said that considering expensive valuations vis-à-vis its peers, he would advise investors who have got allotment in the IPO to book profits on the opening day.
“Though fundamentals of the company look good from a long-term perspective, we would be comfortable for fresh entry at lower levels. At the current juncture, there are better opportunities in the pharmaceutical space which is trading at lower multiples compared to long-term averages,” he said.
Sunil Shankar Matkar also contributed to this story.
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