ValuePickr Forum

Marksans Pharma- Can it be the next Pharma Biggie?

There have been some minor discussions on Marksans Pharma by individual investors, but strangely we don’t seem to having a dedicated thread for this company.

Marksans Pharma is a mid size pharma company deriving more than 99% of its revenues from export market. It is a manufacturer of generic pharmaceuticals across regulated markets – soft gelatin capsules & tablets in niche segments. It also undertakes Formulation CRAMS.
Supplies its products to 25+ countries globally with UK followed by US being its largest markets.

Company reports revenues under four different segments as can be seen below-

History- Marksans was split from Glenmark Pharma in early 2000s under the name Glenmark Laboratories Ltd. Marksans is a result of a merger between Glenmark Laboratories Ltd. and TASC Pharma in March 2005.
In early period (FY07-09), it acquired three companies (Nova, Australia; Bell’s, UK; and Relonchem, UK) using debt raised via FCCB.
During FY10-12, poor integration of acquired companies along with adverse FX movements, made company to post losses, net worth became negative & company got referred to BIFR.
Since FY13, management has been fixing things with focus on specific verticals, subsidiaries are performing well, company exited BIFR in FY13 and is now debt-free with surplus cash.

Future Potential- US seems to be the big potential opportunity for Marksans wherein company is expecting 30+% cagr over next few years. US business grew 65% in FY15.
Company is well poised to capture the niche softgel opportunity.
US comprise 15% of the total sales. Marksans has adopted a different strategy in the US focusing on quality filings rather than quantity of filings which would generate high revenue/ANDA. It has guided for revenue of US$100mn in the next 2 years from 15 products in US. This implies a CAGR of 75% over FY14-17E. As per the management, its current OTC product Advil (US$10mn in FY14) can scale up to US$30-40mn revenues.

Valuation- At cmp of 61 Rs, stock trades at 22x its FY15 reported earnings. For a debt free company with strong return ratio, this looks attractive.

Risks- 1) Regulatory 2) Negative FX moves

Disclosure- This is not a buy/sell reco. Please do your own due diligence before taking a call.

P.S- I have started following this company only recently, hence may be missing some basic negatives. Would request others (especially those who are following this stock for long) to share more info on opportunity size, growth potential & risks.

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Any update on this?

Disclosure : Invested

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The company secretary had mentioned it to be a not a worrying factor and revenues wont be affected as such to one of the fellow investors who enquired. However it would be better to watch the next quarter to see how the revenues from Europe region is getting affected. Also if the management clarifies how they are going to take the corrective actions and respond for this would give clear signal.

As a technical analyst i can see triangle formation on monthly chart , so break out level is 78 on daily closing basis . One has to worry only below 48 . above 78 it may test 120 .

Disclosure- This is not a buy/sell reco. Please do your own due diligence before taking a call

Hey buddy,

Yeah the CS told me the same. Said not to worry and that the new Annual report is on its way pretty soon. The company is planning on growing 30%+ in FY16.

Awaiting the AR and also awaiting the AGM so that we can ask some questions on growth prospects & margins going forward.

As far as I see it…its going to be a high growth, net zero debt & high ROIC play for a few years to come! Should have good days ahead!

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The management done a great job by coming out of bankruptcy. It indeed is well managed now. One can make 10X return in this company but not a very huge upside possible like other turnaround stories like Symphony, Eicher.

One can have small allocation in Marksan and with increase in conviction one can add more

I have just started reading on Marksans Pharma. Some observations below:

  1. There was an equity dilution in FY15 and Promoter’s holding is now < 50%. We consider 60%+ to be great sign.
  2. Long term borrowings are NIL at the end of FY15. Which is a great sign.
  3. FIIs are holding 13% of shares and corporates are holding 5%. So one can say that stock is reasonably discovered.

Also some questions:

  1. Reserves and Surplus went from 1078Cr to 3047r. The NP for FY15 was 1093Cr. Can someone please help understand where is rest of the cash coming from?
  2. Around 4% of promoter shares are “locked”. What are the locked shares?
    Views Invited.

Thanks,
Rupesh

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Rupesh
Look at the figures once again,net profit and cash.

NP figures:

Cash Figures:

What am I missing?

Thanks,
Rupesh

Rupesh,

You are missing the unit of currency.
Numbers are in Millions & not crores.

Rest of reserves & surplus came from QIP that was done.
Issued 2.4 cr shares at around 55 Rs per share.
I hope numbers match now.

Yes, thanks @jk321 and @shanid. Numbers match now :smile:

Hey buddy,

Reserves and surplus DO NOT MEAN cash on books.

Marksans signs the settlement agreement with Bond holders. All but 61 bonds of 1000 USD value remains unsettled because the details untraceable and will be accordingly accounted for in the books.

http://corporates.bseindia.com/xml-data/corpfiling/AttachLive/B8F07EED_72F3_4F24_9198_1982E6FD9C05_093804.pdf

Good step by Management.

Marksans buys Time Cap laboratories

Looks a good acquisition at decent valuations.

At 0.9x times & 7x Ebdita, acquisiton is a lot cheaper than what company is itself trading at.

This acquisition also gives Marksans a good ground in US markets.

Would be interesting to see what synergies they can get out of the acquisition. That can sweeten the deal further.

The acquisition will be funded by money from QIP done 3 months ago. So, QIP was also well timed.

Disclosure- Invested, hence views may be biased

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Any views on sharp run up ?

Good results expected…recent acquisition in US is debt free like Makrsans. This will help increase topline and bottomline. Based on the next 2 quater results, Marksans has the potential to be the next Pharma biggie…fingers crossed.

Disc : Invested and hence my views may be biased.

Results out.

Cons Revenue up 4% YoY and 23% QoQ. (This quarter result does not include Time-Cap lab revenues)
Cons EPS up 16.6% YoY and 26% QoQ
Cons PAT up 23.5% YoY and 25.6% QoQ

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Q1 FY16 Cons NP - 314.69
Q1 FY15 Cons NP - 250.46

So YoY its 23.5% increase.

Q4 FY15 Cons NP - 254.69

So QoQ its 25.6% increase.

(Figures in Mn Rupees)

Disappointing set of results.

Except US region, all other regions failed to grow.
Also US grew lesser than guidance (of 30%).

Only saving grace was margin expansion from 21.1% to 24.9%.
However, on a deeper look, this also looks more a low base effect which will go away from next quarter (EBDITA margins have been 24+% since 2Q15).

Having re-rated sharply, stock looks richly valued to me at cmp; & I think there are better risk-reward plays than Marksans at cmp.

Disclosure- Reduced a bit today

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