IPO: Mankind Pharma

In a nutshell

• Quality: Mankind Pharma's three-year average ROE and ROCE are 29.3 and 30.6 per cent, respectively. It reported a higher net profit margin than most of its peers. Moreover, it also had healthy operating cash flows in the last three financial years.
• Growth: In the last three financial years, Mankind Pharma's topline and profit after tax grew 15.2 and 17.3 per cent per annum, respectively. A rise in chronic diseases and strong generic market growth will help it scale up.
• Valuation: The stock will be priced relatively lower than its peers in terms of both P/E and P/B.
• Overview: Mankind Pharma is one of the leading Indian pharmaceutical companies and has shown strong growth in the generic segment in the past. Its market leadership in condoms and pregnancy detection also augurs well for future growth. However, pricing restrictions by the government might impact the company's bottomline.

About the company
Mankind Pharma is the fourth largest Indian pharmaceutical company in terms of domestic sales and generates most of its revenue from India (98 per cent in FY22). It makes drugs across several therapeutic areas, such as antibiotics, gastrointestinal, etc., and has a strong presence in the consumer healthcare segment (condoms, pregnancy detection, emergency contraceptives, etc.).

Strengths

• Market leader in terms of market share in male condoms (30 per cent), pregnancy detection (80 per cent) and emergency contraception (62 per cent). It is also among the top 10 players in each therapeutic category of its pharma segment.
• With 11,691 medical representatives and 3,561 field managers (as of Dec 2022), it has one of the largest pan-India distribution networks.

Weaknesses

• Quality control: With the pharma segment under intense scrutiny for quality control, any slip in quality might have a drastic impact on the company's future.
• Restriction on pricing by the government (such as some of its drugs getting listed on the National List of Essential Medicines) might hurt the company's bottomline.

Disclaimer: This is not a stock recommendation. Do your due diligence before investing.