Stock To Buy: This Small Cap Pharma Stock Grew 247.2% In 3 Years, Brokerage Sees 110% Upside

Brokerage firm Ventura Securities is bullish on Marksans Pharma Ltd (MPL), suggests "buy" for a target price of Rs 104 per share. According to the given target price, the stock can jump 110% from its current level in 24 months.

Marksans Pharma is a small-cap pharmaceuticals company having a market cap of Rs 2,017.56 crore. The company is engaged in Research, Manufacturing & Marketing of generic pharmaceutical formulation in the global markets. Marksans Pharma manufactures tablets (plain, enteric coated and film coated), hard & soft gelatin capsule, oral liquids and ointments.

Business Overview

Marksans Pharma is differentiated from other generic pharma players focused in the regulated markets by the fact that over 68.6% of its portfolio caters to the OTC segment as of FY22. It is also the only pharma company that has a complete range of products in the therapeutic area of pain management and will soon have a complete product basket for Cough and Cold, Gastrointestinal and Anti-Diabetic therapies.

It has a presence in more than 50+ countries, in the regulated markets which are sourced by 3 state-of-the-art manufacturing facilities located at India (8.4bn softgel and hard gelatin capsules and tablets per annum), UK (2bn bottles per annum, 1bn tubes per annum & 1bn sachets per annum), and USA (6bn tablets and hard capsules per annum).

Stock Outlook & Returns

The current market price (CMP) of the MPL's Stock on 27 October stood at Rs 49.65 per share on NSE. Its 52-week low level is Rs 38.60 and its 52-week high is Rs 70.30, respectively. 

The stock in the past 1 week has surged by 1.53%, giving a positive return. Whereas in the past 1 and 3 months, it gave 5.86% and 1.43% positive returns, respectively. However, it gave 27.04% negative returns over a year. In the past 3 years, it has given multibagger returns of 247.2%, and in the past 5 years, it gave 12.46% positive returns. 

Brokerage's Views on Growth

Over the period of FY22-25E, we expect MPL to grow its revenues at a CAGR of 17.3% INR 2,408.7 cr. EBITDA and net profit is expected to grow at a CAGR of 22.5% and 23.6% to INR 476.3 cr and INR 348.3 cr, respectively, while EBITDA and net margins are expected to improve by 241bps (to 19.8%) and 208bps (to 14.5%), respectively. Return Ratio-ROE is expected to decline by 37bps (to 15.0%) and ROIC to improve by 35bps (to 24.3%), respectively.

Growth visibility with reasonable valuation, Buy Target Price Rs 104

The brokerage said, "We initiate coverage on MPL with a BUY for a price target of INR 104 per share (FY25 PE of 13X), implying an upside of 123% from the CMP of INR 47 next 24 months."

Brokerage's optimism stems from the following:

• Robust pipeline of 74+ products in regulated markets like UK, USA & Australia.
• Doubling of Indian capacity from current levels (῀8 bn units per annum) led by recent acquisition of Tevapharm India thus overall capacity totaling to ῀26 bn by next 12-18 months.
• Fund raising through warrants to be used for creating more capacities, R&D of products and foraying to new markets.
• 3 therapeutic segments (cough and cold, digestive, gastrointestinal and anti-allergy) to have 100% of product coverage in US OTC market.
• Well poised to capture the niche softgel opportunity.
• Further inorganic and organic expansion to support growth.
According to the brokerage, the risk to their estimates are: 1) Delays in product launches 2) Huge turnaround time for acquisitions done.

Disclaimer

The stock has been picked from the brokerage report of Ventura Securities. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.