Mankind Pharma stock gained almost 2 percent in the morning trade on June 22 after Kotak Institutional Equities initiated coverage on the stock with an “add” rating and a target price of Rs 1,875, an 11 percent upside from the current market price.
Strong brand-building
Kotak has forecast a strong 37 percent free cash flow compound annual growth rate (CAGR) over FY2023-26E, with industry-leading return ratios on the back of easing raw material prices, forays into new categories, robust margins, and low working capital.
Mankind generates 53 percent of its domestic revenue from urban areas. Analysts at Kotak are of the view that the newly-listed company is well-positioned to continue to capitalise on gaps in the domestic branded prescription drugs as well as over-the-counter drug segments.
Apart from marketing strengths, the company boasts a strong R&D, which is reflected in the success of Dydroboon, tablets used to treat female infertility and relieve menstrual pain, the brokerage house said in a note on June 22.
Kotak predicts chronic penetration to touch 40 percent from 34 percent over the next five years.
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‘Unique approach’
Mankind possesses the most holistic therapeutic mix among all major players in the Indian pharma market, it said. While its attractive pricing has slightly narrowed, the brokerage firm said that Mankind Pharma's products are still priced at a 21 percent discount to major rivals.
“We expect its 15 percent domestic sales CAGR to outpace the 9-13 percent organic domestic sales CAGR for the rest of our coverage over FY2023-26E,” Kotak's note said.
Leveraging market strength
Within branded prescription drugs, analysts expect a ramp-up of speciality and large brands to drive higher productivity for Mankind.
"We expect its outperformance over IPM to be pronounced over the next few years, as it yields benefits from the field force addition,” the report said.
At 11:57 am, Mankind Pharma was quoting at Rs 1,668, down 1.6 percent from the previous day's close on the National Stock Exchange.
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