Buy This Small Cap Pharma Stock For 74% Return, Revenue Up 27%, Dividend Recommended

Brokerage firm Arihant Capital suggested investors buying the stocks of Marksans Pharma Ltd. During the pharma sector has experienced a major boom, although the many pharma companies have not performed well this quarter. However, according to the brokerage firm, this small cap pharma company is expected to give an aggressive short-term return of around 74%.

Marksans Pharma Ltd.: Target Price, Current Market Price, and Company Performance

The Current Market Price (CMP) of Marksans Pharma Ltd. is Rs. 46. Arihant Capital has estimated a Target Price for the stock at Rs. 80. The stock has the potential to give a 73.91% return, in the upcoming 1 year. This is a small-cap company with a market capitalization of Rs. 1,924 crore.

Stock Outlook
Current Market Price (CMP)	Rs. 46
Target Price	Rs. 80
Potential 1 year return	73.91%
52 week high share price	Rs. 97.60
52 week low share price	Rs. 43.55

Marksans Pharma Ltd.'s revenues have gained by 27% YoY, and by 15% QoQ to Rs. 418 crore. But, the Gross Profit margin has fallen by 673 bps YoY/ up 240 bps QoQ to 53.8%, due to an increase in the raw material cost. EBITDA has also declined by 33% YoY, but gained by 10% QoQ to Rs. 63.6 crore. According to the report, depreciation and amortization expenses also increased significantly by 1,502% YoY/ up by 150% QoQ to Rs. 21.4 crore. On the other hand, the operating margin has narrowed by 1,366 bps YoY/down 72 bps QoQ to 15.2%. PAT has fallen by 63% YoY/down 39% QoQ to Rs. 29.6 crore.

Arihant Capital on the stock advantages

According to Arihant Capital, "The company is concentrating on major regulated markets of US and UK with focus on higher-margin soft gels and OTC products. Also, its strong balance sheet will support inorganic growth through acquisitions of ANDAs, product licenses, and capacity expansion. There was margin pressure in the latter half of FY22 due to cost inflation. However, it is expected to stabilize around current levels. With a focus on backward integration, operating margins can expand going forward. We value Marksans Pharma on both the parameters EV/EBITDA (7x FY24E) and PE valuation of 10x of FY24E EPS."

However, the Board of Directors has recommended a final dividend of Rs. 0.25 per equity share, of the face value of Rs. 1 each for FY22. Till March, this FY, the cash and cash equivalents of the company has stood at Rs. 349 crore and it has incurred a capital expenditure of Rs. 46.3 crore.

Company profile: Marksans Pharma Ltd.

Marksans Pharma Ltd. manufactures and sells generic pharmaceutical formulations. Its key focus area includes Over-the-Counter (OTC) and prescription (Rx) drugs. In FY22, its OTC has contributed 68.6% and Prescription contributed 31.4% of the total revenues. They have wide-ranging applications across fields like Oncology, Gastroenterology, Antidiabetic, Antibiotics, Cardiovascular, Pain Management, and Gynaecology, among others. Marksans manufactures tablets (plain, enteric-coated, and film coated), hard and soft gelatin capsule, oral liquids and ointments. The company's manufacturing facilities are situated at Goa, UK and USA and are accredited by USFDA, UKMHRA and Australian TGA. About 95% of the total revenues come from the regulated markets (FY22). Their plants are approved by the prestigious US FDA, UK MHRA, Australian TGA and other foreign health authorities.

Disclaimer

The above stock was picked from the brokerage report of Arihant Capital. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.