On Wednesday, BofA Securities updated its outlook on Mankind Pharma Ltd (MANKIND:IN) stock, increasing the price target to INR 2,275 from INR 1,900, while continuing to advise an Underperform stance. The revision reflects the firm's recognition of Mankind's solid performance in the Indian market and its volume-driven growth, which has been incorporated into the company's margin expansion.
The analyst from BofA Securities highlighted Mankind's recent acquisition of BSV, noting that it provides the company with a foothold in India's high-growth segments, such as Women's Health and Critical Care, and offers exposure to Rest of World (RoW) markets. However, the analyst also cautioned about the potential execution risks associated with the acquisition, considering the deal's valuation.
In light of the BSV acquisition, BofA Securities has factored in a 7-8% reduction in Mankind's FY25/26 Earnings Per Share (EPS), albeit without presuming any equity dilution at this stage. The firm's updated valuation model now includes the anticipated EBITDA contribution from the BSV deal, the debt related to the acquisition, and a revised multiple of 21.3 times, up from the previous 20.9 times, to align with the re-rating observed among Mankind's peers.
Despite the increased price target, BofA Securities maintains its Underperform rating on Mankind Pharma. The analyst's statement suggests that the current valuation premium of the stock may not fully account for the risks associated with the execution of the recent M&A activity.
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