Antique | Mankind 2QFY24 result update – 231102

Antique | Mankind 2QFY24 result update – 231102

Steady margins, improvement likely from FY25

MANKIND Pharma (MANKIND) reported a revenue growth of 12% on a YoY basis, with the India business growing at a modest 7% YoY. Within this, its branded prescription business grew 8% YoY, largely driven by increased market share in chronic therapies viz. Cardiac, Respiratory, and Anti-Diabetes. However, its acute segment had lower growth on account of the delayed onset of acute season which impacted its key therapies viz. Anti-Infective, Respiratory, GI & VMN, coupled with increased competition in its key product viz. Dydrobroon. The growth in Consumer Healthcare was muted with 2% revenue growth on a YoY basis. To grow its Consumer business, MANKIND continues to invest in brand building by increasing its presence in modern trade channels and e-commerce. We expect the Consumer Healthcare segment to grow at ~10% CAGR, driven by premiumization of existing brands and new launches. Growth in the export segment came as a positive surprise with the revenue growing 12% QoQ and MANKIND gaining market share in an Ophthalmic product on account of a shortage in the market.

Gross margin for the quarter came in at 69.5%, improving ~2.3% on a YoY basis, driven by price hikes and lower RM costs. However, EBITDA margin improved only by 50 bps YoY, due to higher other expenses in relation to brand building and marketing spends. MANKIND has maintained its margin guidance range of 24%–26%. However, we believe the guidance is conservative given the improvement in contribution from the chronic portfolio, new launches, and faster growth from Panacea’s portfolio. With IPM likely to grow at ~10%, we expect MANKIND to grow at ~13% CAGR over a two-year period. We keep our estimates largely unchanged and maintain BUY rating on the stock with a revised target price of INR 2,100 (earlier INR 2,032), valuing the company at 35x 1HFY26 EPS. Amongst our pharma coverage universe, MANKIND remains our top pick.

Investment Summary

MANKIND’s ability to take price hikes and improvement in chronic therapies have been key drivers for its gross margin improvement in 2QFY24. We like MANKIND’s India franchise given its healthy regional mix, improving acute-chronic ratio, and growing Consumer Healthcare business. As MANKIND’s pricing is lower than its peers for a larger part of its portfolio, we believe steady price hikes are also a growth lever. We also expect MANKIND to grow its Anti-Diabetic and Cardiac franchise via new launches (large brands going off-patent in India) and a focused brand/ sub-therapy marketing approach. With pricing tailwind and improved contribution from the chronic portfolio, we believe the gross margin can improve further. On the whole, we expect MANKIND to deliver ~27% EBITDA margin and ~20% EPS CAGR over a two-year period. We maintain BUY rating on the stock.