Marksans Pharma Ltd (MPL): Company Stock Analysis


Since our update note on Marksans Pharma Ltd (MPL) the stock has rallied~31.8%. Despite the strong rally we believe that there is still significant upside potential that warrants a relook. We re-initiate with a BUY for a price target of INR 301 per share (21.8x FY27 net earnings) representing an upside of 126.3% from the CMP of INR 133. We believe that the business moat, secular growth prospects, margin expansion and strong return ratios warrant the prospective valuations.

Over the period  FY23-27E, we expect revenues to grow at a CAGR of 20.7% driven by:
• 27.2% CAGR to INR 2,030 cr for the US geography (51.7% RS). Order book, market share gains and increasing penetration augurs well for the ramp up to maintain pace of growth beyond FY27. 
• The EU market is expected to deliver growth of 19.4% CAGR to INR 1,562 cr (39.8% RS)
• AUS & NZ and RoW markets combined are expected to grow at a CAGR of 2.0% leading to a revenue of INR 335 cr.

EBITDA and net profit are expected to grow at a CAGR of 28.4% and 24.2% to INR 912.9 cr and INR 626.7 cr. On the back of operating leverage, EBITDA margins are expected to improve by  160bps to 23.2% (over 9MFY24 margins of 21.6%). In line PAT margins  are expected to improve by 120bps to 15.9% (over 9MFY24 margins of 14.7%) even after considering lower other income and higher taxation (25.2%). Return Ratios—ROE/ROIC are expected to improve by 427bps/731bps to 19.5%/ 34.1% respectively.

Our optimism stems from the following:
• In 9MFY24 MPL has demonstrated solid revenue growth of 15.8% YoY in the US markets and is enroute to registering USD 100 mn in FY24 sales. With product offerings of more than 100 SKU’s, existing order book of USD 170 mn and continued growth in demand coupled with increased manufacturing capabilities (Teva) the company is positioned to achieve its targeted two-fold increase in revenues over the forecast period.
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