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Recommendations India

Marksans Pharma Q1FY15 results update

August 14, 2014, Thursday, 18:34 GMT | 13:34 EST | 22:04 IST | 00:34 SGT
Contributed by Nirmal Bang

Marksans Pharma (MPL) posted impressive consolidated sales growth of 47.8% yoy for Q1FY15 at Rs 202 cr. EBITDA for the quarter is Rs 42.8 cr, margins 21.1% as compared to 18.4%/14.9% in Q1FY14/Q4FY14 respectively. As the company has exhausted its past accumulated losses, it has come under full tax bracket which restricted the full operational benefit to come down to PAT levels. MPL reported PAT of Rs 25.5 cr, a growth of 6.5%/42.7% on qoq/yoy.

Key Highlights

- UK grew by 60% yoy to Rs 88.6 cr backed by robust growth of Relonchem of 96% to Rs 44 cr. We expect Relonchem to continue the strong growth going forward. Bell grew by 35% yoy to Rs 44.6 cr, on account of favorable rupee movement in last one year.

- As expected Novo Australia was flat at Rs 13.1 cr which is likely to continue for the year and can only expect revival in FY16.

- Standalone revenues were (includes CRAMS, Emerging Markets and US business) at Rs 100.7 cr, a growth of 34.5% yoy. Backed by exports to both SRM regions (albeit on small base) and to US. SRM grew by 74% to Rs 15.7 cr and US by 67% yoy to Rs 35.4 cr.

- CRAMS grew by 11% to Rs 49.6 cr, which was expected as the company is utilizing more facility for its own brands and products and only carrying out high margin business under CRAMS.

- EBITDA margins have improved by ~270 bps yoy to 21.1% which we believe is sustainable levels of margins. It went down in Q4 to 14.9%, due to adverse product mix during the quarter. We expect margins to remain in the range of 20-21% for FY15E and FY16E.

- As the company has exhausted its accumulated losses, it has come under the full tax bracket. Tax cost was Rs 9.3 cr in Q1FY15 as compared to Rs 0.80 cr in Q1FY14.

Valuation & Recommendation

The company has successfully turned around and is now moving towards second Phase of journey, which would be growth-driven. Given the growth momentum and steady margins, we are positive on the prospects of the company. On the valuations front, the stock is trading at a PE of 14.0x/9.9x on FY15E/FY16E EPS respectively, which looks attractive. We believe the company is at an inflection point. We recommend a HOLD on the stock with a target price of Rs 48 (12x on FY16E)