Recommendations from Pharmaceutical Sector
This section gives a recommendation of a stock having stock price below Rs 100 with sound fundamentals and expected to give handsome returns over a one-year time horizon.
MARKSANS PHARMA : WHERE HEALTH IS WEALTH
HERE IS WHY
☛Good financial improvements in last three years
☛Diversified revenue sources
☛Good growth prospects
Marksans Pharma manufactures and markets analgesics, expectorants as well as anti-diabetic, cardiovascular, central nervous system, gastrointestinal and oncologic drugs in addition to antibiotic and anti-allergic products. The company also engages in research, offering contract research manufacturing services to global pharmaceutical companies. It is headquartered in Mumbai with subsidiaries across the globe. Its footprint extends across the United Kingdom, United States and Australia, coupled with proprietary marketing networks in these countries.
The company’s pain management segment contributes the largest to revenue with 29.7 per cent. Cardiovascular contributes around 15.5 per cent, cough and cold another 13.8 per cent while central nervous system contributes around 11 per cent followed by antidiabetics with 10 per cent. Gastrointestinal, anti-allergic, antibiotics and others contribute the remaining roughly 17 per cent. Thus the revenue stream is well-diversified across various categories. The revenue also exhibits geographical diversification with good growth records. Currently, the company markets products in 25+ countries with the UK and the US being the largest markets.
Europe and UK contributed Rs 510 crore to revenue in FY20, around 44.95 per cent of the total revenue. This market showed a three-year CAGR growth of 21.24 per cent. USA and North America contributed Rs 436.4 crore in FY20, around 38.47 per cent. This market showed a three-year CAGR growth of 7.69 per cent. Australia and New Zealand contributed Rs 140.7 crore in FY20, around 12.40 per cent. This market showed a three-year CAGR growth of 10.04 per cent. The rest of the world contributed Rs 47.4 crore in FY20, around 4.18 per cent. This market showed a three-year CAGR growth of 12.83 per cent. Overall the revenue has shown a CAGR growth rate of 13.58 percent for the last three years.
Marksans Pharma’s newly commissioned state-of-the-art research and development centre at Navi Mumbai fosters its foray into new segments. It will cater to hitherto unmet globally therapeutic needs and enhance the opportunities for the company. For the quarter ended March 2020, its total income increased 30.42 per cent to Rs 335.37 crore in Q4FY20 from Rs 257.14 crore in Q4FY19. Total expenses showed an increase of 15.52 per cent to Rs 277.81 crore in Q4FY20 from Rs 240.48 crore in the same quarter last year. Among expenses, cost of material consumed for Q4FY20 stood at Rs 145.4 crore as against Rs 72.18 crore in the same quarter last year, showing an increase of 101.44 per cent.
Profit for the period stood at Rs 42.74 crore as against Rs 9.85 crore in the same quarter last year, showing an increase of 333 per cent. PAT margin for Q4FY20 stood at 12.7 per cent as against 3.8 per cent in Q4FY19. The company’s cash balance as on March 2020 was Rs 93.7 crore. It has repaid long-term loans, thereby deleveraging the balance-sheet and reinvested the surplus in research and development, capacity creation and brownfield expansion. Its ROCE has shown significant improvement in the last three financial years. The ROCE for FY20 was 24.50 per cent as against 4.76 per cent in FY17. PAT margins too have improved from a low single digit in FY17 to almost 10.6 per cent in FY 20. The stock is trading at a PE multiple of 28.40x. By virtue of these factors, we recommend our reader-investors to BUY this stock.
