JM Financial flags growth concerns in Mankind Pharma; initiates with Reduce

JM Financial raised concerns around Mankind Pharma's recent BSV acquisition, which was executed at a high valuation and is expected to dilute return on capital

Domestic brokerage JM Financial has initiated coverage on pharmaceutical company Mankind Pharma with a 'Reduce' rating, citing moderating growth in its core India business, high exposure to slow-growing and mature therapies, and limited scope for a meaningful rebound from the existing portfolio.

 

While Mankind has scaled rapidly since its inception in 1991 to become India’s fourth-largest pharma company by revenue with a prescription market share of about 7.4 per cent, analysts at JM Financial believe a return to double-digit growth will be challenging despite management’s expectations.

 

The brokerage also raised concerns around the recent BSV acquisition, which was executed at a high valuation and is expected to dilute return on capital (RoC), even as it expands the company’s presence in women’s healthcare, infertility and hospital-focused segments.

 

The stock currently trades at 23x and 20x FY27E and FY28E EV/Ebitda, respectively, around a 30 per cent premium to the peer average, though at an 11–13 per cent discount to Torrent Pharma. Factoring in lower growth and return metrics, the brokerage values Mankind at 20x FY28E Ebitda and set a target price of ₹2,030.

India – In need of new growth engines

JM Financial said India remains the core market for Mankind Pharma, comprising around 85 per cent of its overall business, supported by several ₹1 billion-plus brands. However, the brokerage noted that many of these key growth drivers are now slowing, weighing on overall performance and leading to underperformance compared to the Indian pharmaceutical market.

 

While Mankind’s chronic therapy portfolio continues to post healthy growth compared with other top-10 peers, JM Financial said this is insufficient to fully offset the slowdown in acute segments. It also highlighted limited visibility and conviction in the company’s current product launch pipeline. The brokerage expects Mankind to struggle to deliver consistent double-digit growth over the next two to three years without new and sustainable growth drivers.

BSV – Too expensive for moderately high growth

Analysts believe the BSV acquisition brings a high-quality and strategically important asset to the company. However, the valuation paid appears stretched. As a standalone business, BSV is expected to deliver growth of around 18–20 per cent with healthy margins of 27–28 per cent, though the brokerage believes the scale limits further upside.

 

According to JM Financial, the acquisition has absorbed a significant amount of capital and is likely to have a long payback period, while pricing sustainability for some products could come under pressure as competition intensifies. The brokerage continues to factor in healthy growth assumptions for BSV, broadly in line with management guidance.

BSV and the US key growth drivers

Analysts said exports are emerging as a key growth driver for Mankind Pharma, led by the recently acquired BSV business and the company’s expanding presence in the US market. Mankind has steadily increased its export exposure in recent years and now has 56 approved ANDAs in the US, with four more in the pipeline, positioning non-BSV exports as an important growth lever.

 

Within BSV, management plans to leverage its strong footprint across the rest of the world and regulated markets to scale revenues from complex, difficult-to-manufacture products in women’s healthcare, IVF and related segments. Overall, JM Financial expects exports to grow at a healthy 14 per cent CAGR over FY26–FY28E.

Outlook

The brokerage projects revenue, Ebitda, and PAT to grow at CAGRs of 12 per cent, 14 per cent and 8 per cent, respectively, over FY25–FY28E, supported by an 88 bps margin expansion from operating leverage.

 

However, JM Financial warned that the expensive BSV acquisition is likely to drag return on capital from the high-20 per cent range to 8 per cent to 10 per cent during FY26E–FY28E, pushing Mankind’s operating and financial metrics below industry peers.  Disclaimer: The views or investment tips expressed by the brokerage in this article are their own and not those of the website or its management. Business Standard advises users to check with certified experts before taking any investment decisions.