Mankind Pharma shares surge over 8% on strong Q2 earnings show; further growth potential ahead?

Mankind Pharma shares surged more than 8% during the trading session on Tuesday, October 27, as equity market investors focused on the pharmaceutical manufacturer’s healthy revenue gains and strong margin growth in the period under review.

Analysts predict that there is further EBITDA growth potential ahead due to the better visibility of exports and India's prescription drugs business, as earnings beat overall market estimates in the July to September quarter.

NSE data showed that Mankind Pharma shares surged 8.13% to hit an intraday high of ₹2,500 apiece on Tuesday’s market, in comparison to ₹2,312 apiece at the previous equity market close.

Trading activity surpassing 1.6 million equity shares across NSE and BSE combined triggered the high-volume gains on October 27, as per the data collected from Trendlyne.

Tuesday’s rally in Mankind Pharma shares comes for the second consecutive day, as the company’s stock surged 5.4% intraday after the earnings release during the afternoon market session on Monday, October 26.

The pharmaceutical company’s management cited strong growth in both domestic and international business verticals as the key contributor to the overall growth in revenues for the September quarter.

Further growth potential ahead?

US-based investment firm JPMorgan analysts said that they are raising their EBITDA estimates for Mankind Pharma by 3% to 4% after the company surpassed Q2 expectations with key support from the India Rx business and healthy export growth, in turn offsetting consumer weakness in the market.

“We raise EBITDA estimates by 3–4% on better visibility in India Rx & exports. We maintain ‘Neutral’ as we want more consistent India outperformance & a clearer consumer reset,” said JPMorgan analysts.

The experts also highlighted that the India business growth was higher with support from a lower base. Hence, the sustainability of the outperformance in the vertical remains to be seen in the upcoming period.

In line with the review, Macquarie analysts said that the EBITDA beat was driven by revenue beat, better-than-expected gross margin, operating leverage and lower-than-expected R&D expenses in the quarter.

Mankind Pharma’s EBITDA margins expanded 210 basis points to 27.1% in the September quarter, from 25% in the second quarter of the previous financial year, as per the official NSE filing.

This also, in turn, powered the company beating the net profit market estimates with higher-than-expected other income, and a modestly lower effective tax rate.

“Seasonally stronger acute demand, an easier GST-affected base and limited contribution from new brands also leave us reluctant to extrapolate headline growth,” said Bernstein analysts.

Talking about the weak point in Q2 earnings, Jefferies experts highlighted that the muted consumer healthcare growth was the only factor in focus of investors.

How were the Q2 earnings?

The pharmaceutical company’s revenue from core operations advanced 17.3% YoY to ₹4,338 crore in the second quarter, compared to ₹3,697 crore in the same quarter of the previous financial year.

On the operating margins front, Mankind Pharma recorded a 300 basis point growth to 30% in the period under review, compared to 27% margins in the same period of the previous year.

The company’s operating profit improved 27.2% YoY in the period to ₹1,175 crore, from earlier ₹924 crore levels.

Both domestic and international business segments for Mankind Pharma registered strong growth, led by volume outperformance in the Indian pharmaceutical market and exports, while the over-the-counter drugs segments remained muted in Q2.

Domestic revenues increased 15.9% YoY, while international revenues increased by 33% in Q2 FY27, driven by strong growth in both Mankind and BSV International.

The pharma company also launched one new product in the period, increasing the total launched products in the United States to 50 items.