Marksans Pharma Ltd

Consolidating on the back of the Teva acquisition

 TABLE OF CONTENTS
Summary 03

Valuation and Peer Comparison 04

- Band charts and price performance 04
- Our Bull & Bear Case Scenario 05
- Peer comparison & Scatter plot 06

Financial Summary & Story in Charts 08

Ventura Business Quality Score 10

Annual Report Takeaways 11

Risk & Concerns 14

Management Team 15

Quarterly Financials 16

Financial Statement Analysis & Projections 17

Disclaimer 18

Our recent initiating coverage reports

Jupiter Hospitals DCM Shriram Welspun Corp Welspun Specialty Zomato

2 | P a g e ( 4th Oct, 2 0 2 3 ) For any further query, please email us on research@ventura1.com

 BUY @ CMP INR 110 Target: 149 INR in 27 months Upside Potential: 35.5%

Consolidating on the back of the Teva acquisition

• a
Since our initiating coverage on Marksans Pharma Ltd (MPL) the stock has
rallied~134%. Despite the strong rally we believe that there is still significant Industry Pharma
upside potential that warrants a relook. We re-initiate with a BUY coverage for a
price target of INR 149 per share (16x FY26 net earnings) representing an upside of Scrip Details

35.5% upside from the CMP of INR 110. Face Value (INR) 1
Market Cap (INR Cr) 4,983
Over the period FY23-26E, we expect revenues to grow at a CAGR of 15.4% driven by
• 15% CAGR to INR1,178 cr for the US geography (41% revenue share RS)
Price (INR) 110
• The EU market is expected to deliver growth of 16% CAGR to INR1,197 cr (42%
RS) No of Sh O/S (Cr) 45.3

• AUS and NZ market growth of 14% CAGR leading to a revenue of INR316 cr 3M Avg Vol (000) 3,896
(11% RS), and 52W H/L (INR) 122/45
• ROW market revenue scaling to INR152 cr (5.5% RS) Dividend Yield (%) 0.45

EBITDA and net profit is expected to grow at a CAGR of 21.9% and 16.6% to INR 614.0
cr and INR 422.6 cr. On the back of operating leverage (relaxation in freight cost & Shareholding (%) (%)
input cost), EBITDA margins are expected to improve by 327 bps to 21.6%. However Promoter 43.8
PAT margins are expected to decrease by 47bps to 14.9% due to lower other income
Institution 16.7
and higher taxation (25.2%). Return Ratios—ROE/ROIC are expected to improve by
135bps/319bps to 16.6%/ 35.2% respectively. Public 39.5
TOTAL 100.0
Our optimism stems from the following:
• With the Teva manufacturing facility acquisition, India capacity is
Price Chart
expected to double (8bn Tablets, Hard & Soft gel Capsules, Ointments,
y
Liquids and Creams). Meaningful revenue contribution from this plant is Sensex Marksans
o
expected from Q4 of FY2024.
u
•
140.00
US geography will continue to lead the growth with 17 approved products 68000
s 120.00
in OTC and generic pharma and 32 new products in the pipeline. One 66000
. 100.00
additional Dosage delivery system to be introduced. 64000 80.00

• Beyond the UK the company is looking to expand its footprint in the EU.
62000 60.00
60000 40.00
Initial forays include the geographies of Germany, Eastern European 58000 20.00
Countries, Scandinavian countries. Besides the geographical expansion 56000 0.00
Feb-23
Jan-23

Apr-23
May-23
Oct-22

Mar-23

Jun-23
Nov-22
Dec-22

Jul-23

Sep-23
Aug-23
MPL is increasing its product basket with 34 new fillings planned over the
next three years in addition to 16 already filed and waiting approval.
• 10 new products are in the pipeline and expected to be launched over the
next two years in the AUS & NZ markets.
• ROW to see a massive 108 products to be introduced in addition to the 120
products awaiting approval and 124 already approved.
• Better part of the INR200 cr capex is to be executed in FY24 itself while the
remainder would spill over into FY25. Overseas maintenance capex is
pegged at US$ 4-5 mn p.a.
• Despite the Teva acquisition there is cash on books of ~ INR 636 cr and
with handsome cash generation going forth we expect healthy
shareholder payout.
EV/
Revenue EBITDA Net Profit EBITDA Net Profit EPS (₹) BVPS RoE RoIC P/E P/BV
EBITDA
(%) (%) (INR) (%) (%) (x) (x)
(x)
FY22 1,490.8 258.9 184.6 17.4 12.4 4.1 27.0 15.4 24.0 26.8 4.0 17.9
FY23 1,852.1 339.3 266.3 18.3 14.4 5.9 39.0 15.3 26.8 18.5 2.8 12.6
FY24E 2,152.9 428.3 282.7 19.9 13.1 6.2 43.8 14.4 29.4 17.5 2.5 9.9
FY25E 2,475.9 484.2 322.8 19.6 13.0 7.1 49.3 14.6 29.2 15.3 2.2 8.6
FY26E 2,844.5 614.0 422.7 21.6 14.9 9.3 56.5 16.6 35.2 11.7 1.9 6.4

3 | P a g e ( 4th Oct, 2 0 2 3 ) For any further query, please email us on research@ventura1.com

 Attractive outlook and substantial room for growth is available at a cheap valuation

P/E band chart P/E & Standard Deviation

P/E Average
Adj Price 7.96x 10.16x
Upper SD1 Upper SD2
12.36x 14.56x 16.76x
18.0 Lower SD1 Lower SD2

120 16.0
100 14.0
12.0
80
10.0
60
8.0
40 6.0
20 4.0

Apr-21

Apr-22

Apr-23
Jun-21

Oct-21

Feb-22

Feb-23
Jun-22

Oct-22

Jun-23
Dec-21

Dec-22
Aug-21

Aug-22

Aug-23
Apr-21

Apr-22

Feb-23
Apr-23
Jun-21

Oct-21

Feb-22

Jun-22

Oct-22

Jun-23
Dec-21

Dec-22
Aug-21

Aug-22

Aug-23

Market leader available at a discount Price Performance: Marksans V/S Aurobindo

valuation gap Equal Valuation Line Marksans Aurobindo
1.5 130
1.4 110
1.3 90
1.2
70
1.1
1.0 50
0.9 30
0.8
10
0.7
(10)
Nov-20

Feb-21

May-21

Aug-21

Nov-21

Feb-22

May-22

Aug-22

Nov-22

Feb-23

May-23

Aug-23
0.6
Jul-21
Apr-21

Oct-21

Apr-22

Jul-22

Oct-22

Apr-23

Jul-23
Jan-22

Jan-23

(30)
(50)

Source: Ventura Research

4 | P a g e ( 4th Oct, 2 0 2 3 ) For any further query, please email us on research@ventura1.com

 Bull and Bear Case Scenarios

We have prepared likely Bull and Bear case scenarios for FY26 price, based on
revenue growth, EBITDA margins and P/E multiples.
• Bull Case: We have assumed revenue of INR 3015.2 cr (CAGR growth of
17.64%) and an EBITDA margin of 24.70% at P/E of 19.5X, which will result
in a Bull Case price target of INR 230 (an upside of 109.10% from CMP).

• Bear Case: We have assumed revenue of INR 2702.3 cr (CAGR growth

of 13.42%) and an EBITDA margin of 11% at P/E of 14X, which will result in
a Bear Case price target of INR 101.75 (a downside of 7.50% from CMP).

Bull & Bear Case Scenario

Revenue of INR 3015.2 cr Bull Case Price

(17.64% CAGR), EBITDA margin INR 230 per share
of 24.70% and 19.5X P/E

Revenue of INR 2844 cr Target Price

(15.38% CAGR), EBITDA INR 149 per share
margin of 21.6% and 14.5X P/E

Current Price
INR 110 per share

Revenue of INR 2702.3 Cr Bear Case Price

(13.42% CAGR), EBITDA INR 101.75 per share
margin of 11% and 14X P/E

Source: BSE & Ventura Research

5 | P a g e ( 4th Oct, 2 0 2 3 ) For any further query, please email us on research@ventura1.com

 Valuation and comparable metrics of domestic and global companies

P/E Ratio EV/Sales EV/EBIDTA RoE (%) RoIC (%) Sales EBITDA Margin (%) Net Margin (%)
Company Name Mkt Cap Price (INR) PEG (X)
2024 2025 2026 2024 2025 2026 2024 2025 2026 2024 2025 2026 2024 2025 2026 2024 2025 2026 2024 2025 2026 2024 2025 2026
Domestic Peers (fig in INR cr, unless specified)
Marksans Pharma 4,983 110.0 0.96 17.5 15.3 11.7 2.0 1.7 1.4 9.9 8.6 6.4 14.4 14.6 16.6 29.4 29.2 35.2 2,152 2,475 2,844 19.9 19.6 21.6 13.1 13.0 14.9
Granules India Ltd 8,018 331.3 1.23 15.7 12.3 11.0 1.8 1.6 1.4 9.1 7.7 6.8 15.7 16.8 16.2 17.3 18.2 19.1 4,970 5,595 6,250 19.8 20.8 21.0 10.3 11.6 11.7
Alkem Laboratories Ltd 43,951 3,676.0 0.90 28.5 23.5 20.0 3.3 2.9 2.6 20.5 17.2 14.5 15.3 16.4 17.2 21.8 24.7 26.9 12,748 14,064 15,599 16.0 17.0 17.9 12.1 13.3 14.1
Divi's Laboratories Ltd 1,01,290 3,815.5 2.96 53.4 42.6 35.4 11.8 10.1 8.6 37.4 29.8 24.5 13.8 15.5 16.5 25.2 27.7 31.2 8,172 9,454 10,973 31.5 34.0 35.2 23.2 25.2 26.1
Alembic Pharma 15,421 784.6 0.65 28.0 22.0 17.4 2.5 2.2 1.9 16.1 12.9 10.4 11.5 13.2 15.0 13.4 16.1 19.7 6,313 7,053 7,781 15.5 17.0 18.6 8.7 9.9 11.4
ABBOTT India Ltd. 49,620 23,351.2 3.26 44.9 38.7 34.8 7.6 6.6 5.9 32.1 27.2 24.0 29.6 28.8 25.1 33.7 32.9 29.2 6,104 6,890 7,375 23.6 24.2 24.8 18.1 18.6 19.3
Glaxosmithkline Pharmaceutica 27,109 1,600.3 5.47 43.2 39.3 34.7 7.4 6.8 6.9 31.8 28.3 28.3 33.2 34.3 38.8 38.2 39.3 43.8 3,400 3,692 4,021 23.3 24.1 24.4 18.4 18.7 19.4
Sanofi India 16,539 7,181.3 2.69 25.1 22.9 20.7 5.0 4.3 4.4 17.9 15.5 15.6 42.0 38.5 42.5 44.5 41.0 45.0 3,118 3,441 3,756 27.8 28.1 28.1 21.1 21.0 21.3
Sun Pharma 2,75,869 1,149.8 2.33 29.4 25.2 22.5 5.4 4.8 4.2 20.1 17.1 14.8 15.0 15.4 15.6 22.1 25.1 28.3 48,386 53,259 57,985 26.8 27.8 28.5 19.4 20.5 21.1
Cipla 99,743 1,235.5 1.53 27.4 23.8 21.2 3.7 3.3 2.8 16.3 13.9 11.8 13.7 14.0 14.0 21.8 24.4 29.0 25,356 27,875 30,573 22.9 23.7 23.8 14.3 15.0 15.4
Dr Reddy's Labs 63,354 1,872.0 1.23 38.4 30.6 24.6 6.1 5.3 4.7 19.7 16.8 14.0 22.8 23.3 25.2 25.2 28.9 35.3 10,875 12,207 13,680 31.0 31.9 33.3 15.2 17.0 18.8
Zydus Lifescieces 65,323 645.4 1.09 21.2 19.6 18.1 3.3 3.0 2.7 13.9 12.6 11.5 15.3 14.6 13.9 21.0 21.7 22.0 19,396 20,865 22,327 23.7 23.5 23.0 15.9 16.0 16.2
Gland Pharma 27,936 1,696.2 1.60 30.0 25.0 21.6 4.7 4.1 3.9 18.8 16.1 15.2 10.5 11.3 11.6 16.6 18.2 15.3 5,400 6,088 6,747 25.2 25.6 25.6 17.3 18.4 19.2
Biocon 33,227 276.8 0.39 36.8 22.2 17.0 3.2 2.6 2.1 13.7 10.6 8.5 4.7 7.1 9.0 6.1 8.7 10.3 15,373 18,431 22,397 23.0 24.7 25.1 5.9 8.1 8.7
Aurobindo Pharma 52,667 898.9 0.84 18.7 16.0 14.5 1.8 1.6 1.4 10.1 8.5 7.3 9.7 10.3 10.2 13.3 15.0 16.4 27,639 30,088 32,461 18.3 19.4 19.6 10.2 11.0 11.2
Lupin 52,381 1,150.7 0.46 36.7 27.6 23.5 2.9 2.6 2.3 17.7 14.2 12.0 10.4 12.4 12.9 13.5 17.0 18.6 18,970 20,992 23,008 16.3 18.0 18.8 7.5 9.0 9.7
Ajanta Pharma 21,545 1,711.1 1.31 27.8 23.5 20.5 5.3 4.9 4.8 21.1 18.7 17.9 20.0 20.1 22.3 20.9 19.0 20.8 4,171 4,669 5,254 25.1 26.1 26.8 18.6 19.7 20.0
Natco Pharma 15,802 882.3 0.48 14.2 11.5 10.3 4.8 4.6 4.5 11.4 10.7 10.6 19.7 20.2 21.3 26.0 27.2 27.5 3,463 4,007 4,476 42.2 42.6 42.4 32.0 34.3 34.4
Eris Lifesciences 11,177 821.7 1.77 25.3 22.6 19.3 5.7 4.8 4.2 16.1 13.3 11.3 17.8 17.3 17.5 19.1 22.8 27.0 2,037 2,317 2,574 35.2 36.3 36.8 21.7 21.3 22.5
Global Peers (fig in USD mn, unless specified)
Pfizer Inc (US) 1,93,685 34.3 -0.92 10.3 10.1 9.6 3.2 3.1 3.0 9.1 8.8 8.3 19.1 19.1 19.3 17.5 18.6 19.8 66,139.4 66,451.1 67,432.5 35.0 35.5 36.1 28.5 28.9 29.8
Zoetis In (US) 83,895 182.3 2.59 33.3 29.8 26.8 10.2 9.4 8.7 23.7 21.2 19.3 48.6 45.6 40.7 35.9 38.2 39.0 8,592.4 9,269.7 9,958.4 43.1 44.5 45.1 29.3 30.4 31.5
Neurocrine Biosciences (US) 11,086 113.5 0.29 34.5 19.6 14.5 5.5 4.5 3.5 27.5 13.5 9.1 16.1 23.0 22.0 19.2 26.1 25.1 1,857.0 2,120.7 2,447.8 20.1 33.5 38.9 17.3 26.7 31.3
Organon & Co (US) 5,017 19.6 0.48 4.3 4.2 4.0 2.0 1.8 1.6 6.2 5.6 5.1 -448.9 247.9 98.6 26.3 27.4 27.7 6,350.6 6,528.8 6,750.8 31.9 31.7 32.1 18.2 18.1 18.7
Johnson & Johnson (US) 3,93,901 164.0 1.37 15.4 15.0 14.6 4.8 4.2 4.0 12.1 11.2 10.5 33.7 27.6 25.5 33.2 32.1 33.2 84,603.2 92,851.8 95,314.7 39.7 37.9 38.2 30.3 28.3 28.2
Bayer AG (Germany) 52,046 53.0 0.41 7.9 7.2 6.6 1.8 1.7 1.5 7.5 6.8 6.1 16.3 17.0 17.4 10.0 10.8 12.0 51,701.3 53,028.2 54,252.1 23.4 24.7 25.5 12.7 13.6 14.6
Perrigo (US) 4,536 33.5 0.29 12.7 11.2 9.8 1.6 1.5 1.4 11.3 9.5 8.4 7.2 7.9 8.4 7.3 8.7 9.4 4,826.0 5,030.0 5,197.0 14.4 16.0 16.5 7.4 8.0 8.9
Source: Ventura research & Bloomberg

6 | P a g e ( 4th Oct, 2 0 2 3 ) For any further query, please email us on research@ventura1.com

 Marksans with best in class metrics is available at compelling valuations

40.0
Zoetis In (US)
Marksans Pharma
35.0 Dr Reddy's
J & J (US)
Divi's
30.0 Natco Cipla ABBOTT
Organon & Co (US) Sun Pharma
FY26 RoIC (%)

Alkem Eris
25.0 Neurocrine Biosciences (US)
Zydus
20.0 Ajanta
Pfizer Inc (US) Alembic Granules
Gland Pharma
Lupin Aurobindo
15.0
Bayer AG (Germany)
10.0 Biocon
Perrigo (US)
5.0
(1.0) (0.5) 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5
Price to Sales to Sales CAGR (X)

17.0
Marksans Pharma

15.0

13.0 Biocon

Bayer (Germany)
FY23-26 Rev CAGR

11.0
Divi's
9.0 Granules Ajanta Dr Reddy's Natco
Alembic Eris
Gland Pharma Sanofi
7.0 Alkem Lupin ABBOTT
Cipla Sun Pharma
Aurobindo GSK
5.0 J&J (US)

Zydus
3.0
Pfizer (US)
Neurocrine Bio (US) Zoetis In (US)
1.0 Perrigo (US) Organon & Co (US)

(1.0)15.0 17.5 20.0 22.5 25.0 27.5 30.0 32.5 35.0 37.5 40.0 42.5 45.0 47.5
FY26 EBITDA Margin %

Source: Ventura Research, ACE Equity & Bloomberg

7 | P a g e ( 4th Oct, 2 0 2 3 ) For any further query, please email us on research@ventura1.com

 MPL’s Financial Summary
Fig in INR Cr (unless specified) FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24E FY25E FY26E FY27E FY28E FY29E FY30E
Pain Management 271.8 286.6 296.0 349.7 604.0 762.8 815.3 947.7 1,089.9 1,252.1 1,420.5 1,604.0 1,802.7 2,016.5
Cough & Cold 110.3 113.5 138.0 149.1 124.0 169.6 260.1 299.1 344.0 395.6 452.9 516.4 586.1 662.2
Cardiovascular System(CVS) 112.7 140.4 154.0 164.2 124.0 126.5 170.2 195.7 225.1 258.9 296.4 337.9 383.5 433.3
Gastrointestinal 66.8 78.6 75.0 94.1 101.0 98.8 157.7 181.4 208.6 239.8 274.6 313.1 355.3 401.5
Anti-Diabetic 92.7 80.3 206.0 208.9 150.0 89.1 30.6 35.2 40.5 46.5 53.3 60.7 68.9 77.9
Central Nervous System(CNS) 40.5 106.7 63.0 76.0 82.6 53.7 150.8 173.4 199.4 229.3 262.6 299.4 339.8 384.0
Others 79.2 106.6 68.0 92.1 190.6 190.4 267.4 320.4 368.5 422.2 466.6 512.4 558.9 605.5
Revenue from operations 774.0 912.7 1,000.1 1,134.2 1,376.2 1,490.8 1,852.1 2,152.9 2,475.9 2,844.5 3,226.9 3,643.7 4,095.2 4,581.1
YoY Growth (%) (14.2) 17.9 9.6 13.4 21.3 8.3 24.2 15.0 14.0 13.0 12.5 12.0 11.5 11.0
Raw Material Cost 458.7 523.1 498.0 544.9 571.4 716.8 921.4 1,054.9 1,200.8 1,365.4 1,557.0 1,767.2 1,996.4 2,244.7
RM Cost to Sales (%) 59.3 57.3 49.8 48.0 41.5 48.1 49.7 49.0 48.5 48.0 48.3 48.5 48.8 49.0
Employee Cost 149.7 147.7 159.1 168.4 197.3 220.3 239.4 281.9 338.4 369.1 401.6 436.0 472.2 511.1
Employee Cost to Sales (%) 19.3 16.2 15.9 14.8 14.3 14.8 12.9 13.1 13.7 13.0 12.4 12.0 11.5 11.2
Other Expenses 113.9 163.4 210.9 205.7 244.2 294.8 352.1 387.9 452.5 496.1 561.8 634.4 713.2 798.2
Other Expenses to Sales (%) 14.7 17.9 21.1 18.1 17.7 19.8 19.0 18.0 18.3 17.4 17.4 17.4 17.4 17.4
EBITDA 51.7 78.4 132.1 215.2 363.2 258.9 339.3 428.3 484.2 614.0 706.5 806.1 913.4 1,027.0
EBITDA Margin (%) 6.7 8.6 13.2 19.0 26.4 17.4 18.3 19.9 19.6 21.6 21.9 22.1 22.3 22.4
PAT (0.6) 35.8 80.4 120.8 238.5 186.8 265.3 281.6 321.5 421.3 493.6 559.7 643.8 719.0
PAT Margin (%) (0.1) 3.9 8.0 10.6 17.3 12.5 14.3 13.1 13.0 14.8 15.3 15.4 15.7 15.7
Net Profit 8.8 32.9 76.5 117.0 235.9 184.6 266.3 282.7 322.8 422.7 495.2 561.5 645.9 721.3
Net Margin (%) 1.1 3.6 7.6 10.3 17.1 12.4 14.4 13.1 13.0 14.9 15.3 15.4 15.8 15.7

Adjusted EPS 0.2 0.8 1.9 2.9 5.8 4.5 6.5 6.9 7.9 10.3 12.1 13.7 15.8 17.6
P/E (X) 504.8 135.4 58.4 38.1 18.9 24.2 16.8 15.8 13.8 10.6 9.0 7.9 6.9 6.2
Adjusted BVPS 10.6 11.5 13.3 15.5 21.7 29.4 42.6 48.0 54.1 62.1 71.5 82.1 94.3 108.0
P/BV (X) 10.3 9.5 8.2 7.0 5.0 3.7 2.6 2.3 2.0 1.8 1.5 1.3 1.2 1.0
Enterprise Value 5,022.2 5,015.8 5,004.4 4,862.9 4,744.0 4,629.3 4,263.7 4,235.6 4,167.0 3,957.7 3,699.2 3,690.7 3,331.3 3,272.8
EV/EBITDA (X) 97.2 64.0 37.9 22.6 13.1 17.9 12.6 9.9 8.6 6.4 5.2 4.6 3.6 3.2
2.0 1.7 1.4
Net Worth 433.4 470.9 542.5 636.0 886.5 1,202.3 1,745.2 1,964.3 2,214.4 2,542.0 2,925.8 3,361.0 3,861.5 4,420.5
Return on Equity (%) 2.0 7.0 14.1 18.4 26.6 15.4 15.3 14.4 14.6 16.6 16.9 16.7 16.7 16.3
Capital Employed 543.1 588.8 642.7 654.9 905.2 1,243.6 1,786.8 2,016.5 2,268.2 2,598.7 2,984.2 3,427.0 3,935.7 4,503.5
Return on Capital Employed (%) (0.1) 6.3 13.1 19.4 26.5 13.0 12.6 13.8 13.9 15.8 16.1 15.9 15.8 15.5
Invested Capital 518.0 548.9 609.2 561.2 692.8 893.9 1,071.2 1,262.2 1,443.7 1,562.0 1,687.2 2,113.9 2,255.2 2,755.6
Return on Invested Capital (%) 0.5 9.4 17.9 29.5 43.8 24.0 26.8 29.4 29.2 35.2 38.0 34.4 36.9 33.8

Cash Flow from Operations 14.1 50.1 27.4 233.3 178.6 77.2 249.8 238.8 278.9 363.9 431.7 499.4 572.6 652.3
Cash Flow from Investing (20.7) (38.8) (13.5) (59.6) (44.8) (41.5) (259.2) 186.6 (123.5) (45.8) (48.1) (350.6) (53.2) (415.9)
Cash Flow from Financing (3.5) 3.4 (20.8) (113.6) (15.3) 79.5 197.8 (66.6) (85.2) (106.1) (123.4) (132.8) (152.0) (169.2)
Net Cash Flow (10.1) 14.7 (6.9) 60.2 118.5 115.2 188.4 358.9 70.2 212.0 260.2 15.9 367.4 67.2
Free Cash Flow (15.1) 18.5 21.7 180.4 139.0 37.3 14.1 96.0 166.1 328.6 394.0 159.4 530.6 248.3
FCF to Revenue (%) (1.9) 2.0 2.2 15.9 10.1 2.5 0.8 4.5 6.7 11.6 12.2 4.4 13.0 5.4
FCF to EBITDA (%) (29.2) 23.6 16.4 83.8 38.3 14.4 4.1 22.4 34.3 53.5 55.8 19.8 58.1 24.2
FCF to Net Profit (%) (170.6) 56.2 28.4 154.2 58.9 20.2 5.3 34.0 51.4 77.7 79.6 28.4 82.1 34.4
FCF to Net Worth (%) (3.5) 3.9 4.0 28.4 15.7 3.1 0.8 4.9 7.5 12.9 13.5 4.7 13.7 5.6

Total Debt 110 118 100 19 19 41 42 52 54 57 58 66 74 83

Net Debt 85 78 67 -75 -194 -308 -674 -702 -771 -980 -1,239 -1,247 -1,606 -1,665
Net Debt to Equity (X) 0.2 0.2 0.1 (0.1) (0.2) (0.3) (0.4) (0.4) (0.3) (0.4) (0.4) (0.4) (0.4) (0.4)
Net Debt to EBITDA (X) 1.6 1.0 0.5 (0.3) (0.5) (1.2) (2.0) (1.6) (1.6) (1.6) (1.8) (1.5) (1.8) (1.6)
Interest Coverage Ratio (X) 0.4 5.0 11.3 18.9 38.0 25.3 31.5 27.1 29.8 39.7 46.6 51.9 56.2 59.2

Fundamental scores
Altman Z Score 1.9 2.4 2.6 2.7 3.1 2.2 9.0 8.2 7.7 7.3 6.9 6.4 6.0 5.6
Piotroski F-score 3.0 8.0 6.0 8.0 6.0 4.0 5.0 5.0 6.0 7.0 5.0 2.0 5.0 2.0
Beneish M-score (2.2) (2.4) (2.0) (2.3) (1.9) (1.5) (2.2) (1.9) (2.0) (2.1) (2.1) (1.8) (2.1) (1.9)

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 Marksans Story in Charts

Total Revenue expected to grow Therapeutic Mix

Pain Management Cough & Cold
Revenue YoY Growth (%)
Cardiovascular System(CVS) Gastrointestinal
3,000 30 Anti-Diabetic Central Nervous System(CNS)
25 Others
2,500 20 3,000
2,000 15 F
10
2,000
Y
1,500 5 1
2
0
1,000 , (5)
9
0
(10) 1,000
500 0 F
(15)
Y
0
0
(20)
0 2
FY24E
FY15

FY16

FY17

FY18

FY19

FY20

FY21

FY22

FY23

FY25E

FY26E

FY23
FY16

FY17

FY18

FY19

FY20

FY21

FY22

FY24E

FY25E

FY26E
1
1
F
Y
0 2

Improving profitability ratios Return ratios

EBITDA Net Profit Net Worth Invested Capital
EBITDA Margin (%) Net Margin (%) RoE (%) RoIC (%)

700 30 3,000 60
600 25 2,500 50
500 20 2,000 40
400
15 1,500 30
300
200 10 1,000 20
100 5 500 10
0 0 0 0
FY21
FY15

FY16

FY17

FY18

FY19

FY20

FY22

FY23

FY24E

FY25E

FY26E

FY19

FY20
FY15

FY16

FY17

FY18

FY21

FY22

FY23

FY24E

FY25E

FY26E
Cash Flows Working Capital Cycle
CFO FCFF
Payable Days Inventory Days
CFO to EBITDA FCFE to Net Profit
400 4.0 Receivable Days Net Working to Sales (%)

300 2.0 140 50

0.0 120
200 (2.0) 40
100
100 (4.0) 80 30
0 (6.0) 60 20
(8.0) 40
(100) (10.0) 10
20
(200) (12.0) 0 0
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22
FY23
FY24E
FY25E
FY26E

FY18
FY15

FY16

FY17

FY19

FY20

FY21

FY22

FY23

FY24E

FY25E

FY26E

Source: Company Reports & Ventura Research

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 Ventura Business Quality Score

Key Criteria Score Risk Comments

Management &
Leadership
The board maintains a good level of quality and demonstrates a solid
Management 8 Low
understanding of global industry. The leadership team is adequately
Quality
qualified and experienced.

Promoters Holding 5 Medium The promoter holding has decreased from 48.35% on 30th June 2022 to
Pledge 43.85% as on 30th June 2023 and there is no promoter pledging as of 30th
June 2023.
The average experience of directors is >26 years with significant experience
Board of Directors 8 Low
in their respective sectors and expert areas
Profile
Industry
Consideration
The Indian pharmaceutical sector is poised for substantial expansion due to
rising export prospects, fueled by a growing global elderly population
Industry Growth 8 Low driving medication demand. However, it's essential to closely monitor US
price fluctuations.
Regulatory 3 High Export-oriented firms face elevated regulatory risks, particularly those
Environment or Risk involved in developed international markets.
Entry Barriers /
7 High capex and regulatory requirements coupled with operational costs.
Competition Low
Business
Prospects
MPL is looking to launch 76+ products in regulated markets and a new
capacity addition of 8 bn units per annum with the recent acquisition. The
New Business / 8 Low
company is focusing on liquids, creams, and ointments in the OTC category
Client Potential
while also seeking to extend its presence beyond the UK into the EU.
Global footprint- Present in 50+ countries, ~96% revenue generated from
Business 8 Low
the regulated markets of the US, UK and Europe, Australia, and New
Diversification
Zealand.

Margins are on path of improving due to Operating leverage, Relaxation in

Margin Expansion 8 Low
Freight & Input Cost.
Potential
Earnings are expected to grow at 15% CAGR to reach the target of 3,500 cr in
Earnings Growth 8 Low
a few years.
Valuation and
Risk
MPL is net debt free generating positive cash flows thus building a robust
Balance Sheet 8 Low
balance sheet.
Strength
MPL achieved net debt position in FY23 and is expected to maintain the
Debt Profile 8 Low position in coming years.

FCF Generation 7 Low Company generated free cash flows of INR 191 cr as of FY23.

Dividend Policy 7 Low MPL is a regular dividend paying company

Total Score 101 The overall risk profile of the company is good, and we consider it as a LOW
Low
Ventura Score (%) 72.1% risk company for investments

Source: Company Reports & Ventura Research

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 Annual Report Takeaways

We analyzed the FY23 annual report of MPL and our key observations are as follows: .

Key Takeaways

Global pharmaceutical industry

The global pharmaceutical business encountered many bottlenecks during the year
because of supply-chain interruptions and a lack of raw materials. However due to
increased awareness after the pandemic, governments and healthcare systems around
the world are now more willing to invest in the pharmaceutical sector. At a CAGR of 4-5%,
the industry is estimated to reach USD 1.5 trillion in CY2023. Over the next five years, the
industry is expecting to launch a total of 300 new medications, with a bias toward
specialized, niche, and orphan drugs. .

Global Biologics industry

As per the IQVIA Industry report, the market for biologic medications (including
biosimilars), which accounts for almost one-third of the worldwide pharmaceutical
business, was estimated at $ 443 billion in FY22. The global biologics market size is
expected to expand at a compound annual growth rate (CAGR) of 3.9% from 2020 to
2025. Between 2024 and 2029, when 100 biologic medicines lose their exclusivity,
Europe provides tremendous opportunity, with revenues valued at more than USD 40
billion in the year of expiration. .

Global Generics industry

The global generic drug industry is expected to reach USD 1,323.68 million by 2030, at a
CAGR of 9.9% during the forecast period 2023 to 2030. Future generic product demand
will be sustained and expand because of an ageing population and budgetary pressures
in public health. Obesity, diabetes, and other chronic illnesses and ailments will continue
to drive market growth.

Global OTC industry

The global over-the-counter (OTC) drugs market is projected to witness substantial

growth, with revenue expected to reach USD 238,453.92 million by 2031, growing at a
CAGR of 7.0% during the forecast period. .

Indian pharmaceutical industry

India's domestic pharmaceutical market is estimated to reach USD 130 billion by 2030.
In terms of volume, pharmaceutical sector in India is the third largest in the world. With
20% of the global supply, the country is also the largest generic drug supplier in the world.
The focus is to promote research and innovation in the country, with a deeper focus on
quality manufacturing, affordability of drugs and adoption of innovation and technology.

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 Growth Opportunities for MPL

• Marksans achieved FY 2022-23 guidance of INR 1800 cr in revenue, by reaching

INR 1825 cr in FY23.

• MPL generates around 95% of its revenue from regulated markets and expects
to further expand in these markets through the continued push of existing
products in regulated and other related geographies.

• Recent acquisition of manufacturing capacity from Tevapharm (India) provides

scalable production capability, with plans to double the existing capacity of 8
billion units per annum. So, the overall manufacturing capacity will go up to 26.4
billion units per annum. This expansion includes the manufacturing of tablets,
hard and soft gel capsules, ointments, liquids, creams, and more, and expect a
meaningful revenue contribution from this plant to start from Q4 of FY2024.

• MPL’s Growth Strategies are as follows:

a) Backward Integration for sustained margin development
b) Investing in new low-cost manufacturing capabilities
c) Supplement growth through acquisitions
d) Continued product launches through a healthy product pipeline
e) Increasing OTC store brand / market share gains

Board of Directors

Details of Board of Directors

Particulars FY22 FY23
Mr. Mark Saldanha CMD CMD
Mr. Jitendra Sharma CFO CFO
Mrs. Sandra Saldanha WTD WTD
Mr. Varddhman V. Jain WTD WTD
Mr. Seetharama R. Buddharaju ID ID
Mr. Digant Mahesh Parikh ID ID
Mr. Abhinna Sundar Mohanty ID ID
Dr. (Mrs.) Meena Rani Surana ID ID
Dr. Sunny Sharma NED NED
Source: Company Reports

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 Auditor’s qualifications and significant notes to accounts

MSKA & Associates is the auditor and there was no qualifications/emphasis of matters
highlighted by them in the FY23 Annual Report.

Related Party Transactions and Balances

Related party transactions have remained low over the past 4 years.

MPL’S Related party

Particulars FY20 FY21 FY22 FY23
Rent Paid 1.0 1.0 1.0 1.0
Managerial remuneration 4.6 4.7 9.3 11.1
Equity Shares Issued 0 0 0 7.4
Total Related Party Transactions 5.6 5.7 10.3 19.5
Related party transactions to sales (%) 0.5 0.4 0.7 1.0
Source: Company reports

Contingent Liabilities

MPL’S Related party

Particulars FY20 FY21 FY22 FY23
Guarantees and letter of credit 47.6 19.8 17.0 0.0
Claims against the Company not 0.6 0.0 0.0 0.0
acknowledged
Income tax on account of disallowances 0.0 0.0 0.0 14.4
/ additions
Total Contingent Liabilities 48.2 19.8 17.0 14.4
Contingent Liabilities to Sales (%) 4.2 1.4 1.1 0.7
Source: Company reports

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 Key Risks & Concerns

• US market price erosion: The generic pharma industry has continued to face price
erosion in its US generics business. This, combined with cost inflation and supply
chain issues, had a substantial impact on generic players' margins in FY23.

• Forex: Marksans received 96% of its entire FY23 revenues from markets other than
India, and any negative impact of forex currency can have a major impact on net
profit.

• USFDA approvals: The USFDA recently eliminated its inspection and audit criteria.
Any critical key observation in any of the facilities can suspend production in the
short term, significantly reducing MPL's earnings.

• Amortization of R&D expense: Pharma businesses incur significant R&D costs, which
are capitalized to the molecule development costs and subsequently amortized in
the P&L. However, if the molecule is not authorized in clinical trials, the corporations
are forced to expense the entire amount in the P&L in a single year, which can cause
instability in profits.

• Technology risk: The corporation faces technology risk since its inability to upgrade
to new technologies in operations may influence medicine output, resulting in
business loss to competitors.

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 Management Team
Key Person Designation Details

He is a science graduate from Mumbai University and has 30+ years of

Mr Mark Saldanha MD
experience in the marketing, production, and finance functions. He has
been associated with Marksans since 2005.

Whole-time She has a master’s degree in arts (Sociology). She has vast experience in
Mrs. Sandra Saldanha Director the field of Human Resource Management, Business Development,
Projects, and Supply Chain Management. Mrs. Saldanha is also a Director in
Marksans Pharma (UK) Limited.

He has done M. Pharm (Pharmaceuticals) and has 27+ years of experience

Mr. Varddhman V. Jain
Whole-time
in manufacturing, quality R&D, compliance & regulatory affairs both for API
Director
and FDF manufacturing. He had handled several
regulatory inspections including USFDA, MHRA, PMDA Japan and WHO.

He is a CA, CWA and has 28+ years of expertise in treasury, forex PG

Mr. Jitendra Sharma CFO management, costing, fund raising and internal control systems.

He has a Diploma – Analytical Chemistry with 28+ years of industry

Mr. Sunil K Rane Sr. VP – QC
experience and has worked with Cipla Ltd before.

Mr. Harish Vyas He has completed BSc, MBA in TQM/HR with 35 years of industry
Director- Quality experience and has worked with Mankind Pharma. Ltd before.

Mr. Manda Murali Bhaskar Senior General He has done B. Tech and has 26+ years of Industry experience and has
Rao Manager worked with Sanofi Healthcare Limited before.

GM-International He has done B. Tech and has 18 years of experience and has worked
Ms. Ashwini Memane Business with Alkem Laboratories Ltd before.

General Manager- He has completed BSC / MICA and has 24 years of experience and has
Mr. Piyush Joshi ADL worked with Micro Labs Ltd before.

Mr. Ramesh Melusuri Deputy General He has completed BSc in Science and has 21 years of experience and
Manager has worked with Hetero Drugs before.

Source: Company Reports

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 Quarterly and Annual Performance
Fig in INR Cr (unless specified) Q1FY22 Q2FY22 Q3FY22 Q4FY22 FY22 Q1FY23 Q2FY23 Q3FY23 Q4FY23 FY23 Q1FY24 FY24E
Revenue from operations 349.0 361.2 362.6 418.0 1,490.8 433.8 452.6 479.8 486.0 1,852.1 500.0 2,152.9
YoY Growth (%) 5.4 1.3 1.2 26.6 8.3 24.3 25.3 32.3 16.3 24.2 32.3 15.0
Raw Material Cost 162.3 175.4 167.5 211.6 716.8 214.8 223.2 239.5 243.8 921.4 242.8 1,054.9
RM Cost to Sales (%) 46.5 48.6 46.2 50.6 48.1 49.5 49.3 49.9 50.2 49.7 48.6 49.0
Employee Cost 49.0 54.8 56.1 60.4 220.3 56.6 59.7 62.2 60.9 239.4 68.2 281.9
Employee Cost to Sales (%) 14.1 15.2 15.5 14.4 14.8 13.1 13.2 13.0 12.5 12.9 13.6 13.1
Other Expenses 60.3 70.9 81.2 82.4 294.8 89.5 89.4 101.5 71.7 352.1 87.1 387.9
Other Expenses to Sales (%) 17.3 19.6 22.4 19.7 19.8 20.6 19.8 21.2 14.8 19.0 17.4 18.0
EBITDA 77.3 60.1 57.8 63.6 258.9 72.9 80.3 76.6 109.6 339.3 102.0 428.3
EBITDA Margin (%) 22.2 16.6 15.9 15.2 17.4 16.8 17.7 16.0 22.5 18.3 20.4 19.9
Net Profit 61.9 46.3 49.1 28.1 184.6 59.7 61.3 63.4 81.9 266.3 68.7 282.7
Net Margin (%) 17.7 12.8 13.5 6.7 12.4 13.8 13.5 13.2 16.9 14.4 13.7 13.1

Adjusted EPS 1.5 1.1 1.2 0.7 4.5 1.5 1.5 1.5 2.0 6.5 1.7 6.9
P/E (X) 24.2 16.8 15.8
Adjusted BVPS 29.4 42.6 48.0
P/BV (X) 3.7 2.6 2.3
Enterprise Value 4,629.3 4,263.7 4,235.6
EV/EBITDA (X) 17.9 12.6 9.9

Net Worth 1,202.3 1,745.2 1,964.3

Return on Equity (%) 15.4 15.3 14.4
Capital Employed 1,243.6 1,786.8 2,016.5
Return on Capital Employed (%) 13.0 12.6 13.8
Invested Capital 893.9 1,071.2 1,262.2
Return on Invested Capital (%) 24.0 26.8 29.4

Cash Flow from Operations 77.2 249.8 238.8

Cash Flow from Investing (41.5) (259.2) 186.6
Cash Flow from Financing 79.5 197.8 (66.6)
Net Cash Flow 115.2 188.4 358.9
Free Cash Flow 37.3 14.1 96.0
FCF to Revenue (%) 2.5 0.8 4.5
FCF to EBITDA (%) 14.4 4.1 22.4
FCF to Net Profit (%) 20.2 5.3 34.0
FCF to Net Worth (%) 3.1 0.8 4.9

Total Debt 41.3 41.6 52.3

Net Debt (308.4) (674.0) (702.1)
Net Debt to Equity (X) (0.3) (0.4) (0.4)
Net Debt to EBITDA (X) (1.2) (2.0) (1.6)
Interest Coverage Ratio (X) 25.3 31.5 27.1

Source: Company Reports

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 Financial Analysis & Projections
Fig in INR Cr (unless specified) FY22 FY23 FY24E FY25E FY26E Fig in INR Cr (unless specified) FY22 FY23 FY24E FY25E FY26E
Income Statement Per share data & Yields
Revenue 1,490.8 1,852.1 2,152.9 2,475.9 2,844.5 Adjusted EPS (INR) 4.1 5.9 6.2 7.1 9.3
YoY Growth (%) 8.3 24.2 16.2 15.0 14.9 Adjusted Cash EPS (INR) 5.1 7.0 7.5 8.5 10.7
Raw Material Cost 716.8 921.4 1,054.9 1,200.8 1,365.4 Adjusted BVPS (INR) 27.0 39.0 43.8 49.3 56.6
RM Cost to Sales (%) 48.1 49.7 49.0 48.5 48.0 Adjusted CFO per share (INR) 1.7 5.5 5.3 6.2 8.0
Employee Cost 220.3 239.4 281.9 338.4 369.1 CFO Yield (%) 1.6 5.1 4.8 5.6 7.4
Employee Cost to Sales (%) 14.8 12.9 13.1 13.7 13.0 Adjusted FCF per share (INR) 0.8 0.3 2.1 3.7 7.3
Other Expenses 294.8 352.1 387.9 452.5 496.1 FCF Yield (%) 0.8 0.3 1.9 3.4 6.7
Other Exp to Sales (%) 19.8 19.0 18.0 18.3 17.4
EBITDA 258.9 339.3 428.3 484.2 614.0 Solvency Ratio (X)
Margin (%) 17.4 18.32 19.9 19.6 21.6 Total Debt to Equity 0.0 0.0 0.0 0.0 0.0
YoY Growth (%) (28.7) 31.1 26.2 13.1 26.8 Net Debt to Equity (0.3) (0.4) (0.4) (0.3) (0.4)
Depreciation & Amortization 44.8 51.9 57.5 62.0 63.6 Net Debt to EBITDA (1.2) (2.0) (1.6) (1.6) (1.6)
EBIT 214.1 287.5 370.8 422.3 550.3
Margin (%) 14.4 15.5 17.2 17.1 19.3 Return Ratios (%)
YoY Growth (%) (34.5) 34.3 29.0 13.9 30.3 Return on Equity 15.4 15.3 14.4 14.6 16.6
Other Income 41.9 59.3 19.1 21.5 26.5 Return on Capital Employed 13.0 12.6 13.8 13.9 15.8
Bill discounting & other charges 8.4 9.1 13.7 14.1 13.9 Return on Invested Capital 24.0 26.8 29.4 29.2 35.2
Fin Charges Coverage (X) 25.4 31.5 27.1 29.8 39.7
Exceptional Item 0.0 0.0 0.0 0.0 0.0 Working Capital Ratios
PBT 247.5 337.7 376.3 429.6 563.0 Payable Days (Nos) 49 45 45 45 45
Margin (%) 16.6 18.2 17.5 17.4 19.8 Inventory Days (Nos) 104 96 96 96 96
YoY Growth (%) (24.0) 36.4 11.4 14.2 31.0 Receivable Days (Nos) 97 82 82 82 82
Tax Expense 60.7 72.3 94.7 108.1 141.7 Net Working Capital Days (Nos) 152 132 132 132 132
Tax Rate (%) 24.5 21.4 25.2 25.2 25.2 Net Working Capital to Sales (%) 41.5 36.2 36.2 36.2 36.2
PAT 186.8 265.3 281.6 321.5 421.3
Margin (%) 12.5 14.3 13.1 13.0 14.8 Valuation (X)
YoY Growth (%) (28.7) 42.0 6.1 14.2 31.0 P/E 26.8 18.5 17.5 15.3 11.7
Min Int/Sh of Assoc (2.2) 1.0 1.1 1.3 1.5 P/BV 4.0 2.8 2.5 2.2 1.9
Net Profit 184.6 266.3 282.7 322.8 422.7 EV/EBITDA 17.9 12.6 9.9 8.6 6.4
Margin (%) 12.4 14.4 13.1 13.0 14.9 EV/Sales 3.1 2.3 2.0 1.7 1.4
YoY Growth (%) (28.9) 44.3 6.2 14.2 31.0
Cash Flow Statement
Balance Sheet PBT 247.5 337.7 376.3 429.6 563.0
Share Capital 40.9 45.3 45.3 45.3 45.3 Adjustments 2.0 36.3 66.3 74.4 76.2
Total Reserves 1,182.0 1,719.8 1,938.8 2,189.0 2,516.6 Change in Working Capital (111.5) (51.8) (109.0) (117.0) (133.5)
Shareholders Fund 1,223.0 1,765.1 1,984.2 2,234.3 2,561.9 Less: Tax Paid (60.7) (72.3) (94.7) (108.1) (141.7)
Long Term Borrowings 0.0 0.0 0.0 0.0 0.0 Cash Flow from Operations 77.3 249.8 238.8 278.9 363.9
Deferred Tax Assets / Liabilities 13.8 15.4 15.4 15.4 15.4 Net Capital Expenditure (46.3) (242.9) (153.1) (123.4) (45.7)
Long Term Lease Liability 41.4 65.7 73.8 67.7 62.1 Change in Investments 4.8 (16.3) 339.7 (0.1) (0.1)
Long Term Trade Payables 0.0 0.0 0.0 0.0 0.0 Cash Flow from Investing (41.5) (259.2) 186.6 (123.5) (45.8)
Long Term Provisions 1.9 3.3 3.8 4.6 5.0 Change in Borrowings 7.4 217.1 10.7 1.6 2.9
Total Liabilities 1,280.0 1,849.4 2,077.2 2,322.0 2,644.4 Less: Finance Cost (8.4) (9.1) (13.7) (14.1) (13.9)
Net Block 428.3 410.9 506.5 568.0 550.1 Proceeds from Equity 91.2 0.0 0.0 0.0 0.0
Capital Work in Progress 0.7 7.3 0.0 0.0 0.0 Buyback of Shares 0.0 0.0 0.0 0.0 0.0
Intangible assets under development 1.9 0.0 0.0 0.0 0.0 Dividend Paid (10.6) (10.2) (63.6) (72.6) (95.1)
Non Current Investments 0.0 0.0 0.0 0.0 0.0 Cash flow from Financing 79.5 197.8 (66.6) (85.2) (106.1)
Long Term Loans & Advances 4.2 0.0 0.0 0.0 0.0 Net Cash Flow 115.2 188.4 358.9 70.2 212.0
Other Non Current Assets 0.0 18.9 21.7 24.8 28.0 Forex Effect 0.0 0.0 0.0 0.0 0.0
Net Current Assets 845.0 1,412.3 1,548.9 1,729.2 2,066.3 Opening Balance of Cash 212.2 327.4 394.8 741.4 823.9
Total Assets 1,280.0 1,849.4 2,077.2 2,322.0 2,644.4 Closing Balance of Cash 327.4 394.8 741.4 823.9 1,035.9
Source: Company Reports & Ventura Research

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 Disclosures and Disclaimer

Ventura Securities Limited (VSL) is a SEBI registered intermediary offering broking, depository and portfolio management services to clients. VSL is member
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forming the subject matter of this document. The projections and forecasts described in this report were based upon a number of estimates and
assumptions and are inherently subject to significant uncertainties and contingencies. Projections and forecasts are necessarily speculative in nature, and
it can be expected that one or more of the estimates on which the projections and forecasts were based will not materialize or will vary significantly from
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associates, the authors of this report or any other person that these projections or forecasts or their underlying assumptions will be achieved. For these
reasons, you should only consider the projections and forecasts described in this report after carefully evaluating all of the information in this report,
including the assumptions underlying such projections and forecasts. The price and value of the investments referred to in this document/material and the
income from them may go down as well as up, and investors may realize losses on any investments. Past performance is not a guide for future performance.
Future returns are not guaranteed and a loss of original capital may occur. Actual results may differ materially from those set forth in projections. Forward-
looking statements are not predictions and may be subject to change without notice. We do not provide tax advice to our clients, and all investors are
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