Is Mankind Pharma IPO worth a subscription? Here's what brokerages suggest

The Rs 4,326-crore initial public offering (IPO) of Mankind Pharma will open for subscription from Tuesday, April 25. The price band is set in the range of Rs 1,026-1,080 per share. The offer-for-sale (OFS) portion consists of 40.1 million shares. 

Mankind Pharma is India's fourth largest pharma company in terms of domestic sales and third largest in terms of sales volume on a moving annual turnover (MAT) basis, as of December 2022. The company develops, manufactures, and markets a diverse range of acute-to-chronic therapies. Some of the well-known consumer healthcare products include Manforce, Prega News, Unwanted 72, Gas-o-Fast, Health OK, and AcneStar.

In the grey markets, shares of Mankind Pharma enjoyed a premium of Rs 90, which translated to a likely listing price of Rs 1,170 per share on the upper price band. Upon listing, the company will join peers like Abbott India, GlaxoSmithKline Pharmaceuticals, Eris Lifesciences, Pfizer, among others.

Issue-wise, around 50 per cent of the IPO is reserved for qualified institutional buyers (QIBs), 15 per cent for non-institutional investors (NIIs), and the remaining 35 per cent for retail. 

On the financial front, revenue from operations rose 10.5 per cent year-on-year (YoY) to Rs 6,696 crore in the October-December quarter of FY23 (Q3FY23), while profit declined 19.3 per cent YoY to Rs 1,016 crore in Q3FY23.

Key risks: Pricing pressure persists on certain drugs as countries seek to expand patient access to affordable drugs, while keeping budgets in check. In addition, rising input costs, and addition of a national list of essential medicines (NLEM).

Here's what top brokerages recommend for Mankind Pharma's IPO:

Anand Rathi

At the higher end of the issue price band (Rs 1,080 per share), analysts believe that the stock is valued at ~30x FY22 EPS of Rs 36 apiece. Since pharma companies  quote at an average price-to-earnings ratio (P/E) of 25x/22x FY24e/FY25e, the brokerage firm expects 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. 

Centrum 

On the basis of the company's financial performance in recent years, analysts observe impressive margin, and return ratios, with benefits from branded formulations businesses. That apart, the company's acquired Panacea's brands potential in transplant, and oncology segment should be a key watchout. The brokerage firm recommends 'subscribe' to the issue, given its strong leadership in IPM after Sun Pharma, Abbott, and Cipla. Valuation-wise, too, Mankind Pharma is at 20 per cent discount to Torrent’s PEx in FY25. 

Sharekhan

The brokerage firm pegged that the company's strong presence in several acute as well as chronic therapeutic areas, coupled with a good consumer healthcare portfolio, provide an opportunity to achieve consistent growth in the coming years. The company's revenue grew at a compounded annual growth rate (CAGR) of 15.2 per cent over FY20-22, while its EBITDA margins stood around ~26 per cent. The IPO, analysts said, is being offered at 30.2x/28.7x its FY22 earnings-per-share (EPS), which is at a discount to the average industry valuations.

Kotak Securities

Analysts believe that the company's 25 manufacturing facilities,  research and development (R&D) capabilities, and pan-India marketing and distribution presence, have helped them to renovate products, and assisted them to maintain consistent product quality. Going ahead, the company's investment in digital platforms like Docflix, Mankind Connect, and Prana will help them enhance their consumer healthcare business.