CMP Rs76, Target (2-year) Rs155, Upside 100.4%
Status quo prevails in Goa MHRA observations; mgmt call gives us comfort: reiterate BUY
Marksans Pharma submitted its response to an exchange query related to media reports about UK health regulator MHRA notification of GMP deficiency in Goa plant. Company clarified that UK regulator in its November 2015 inspection had issued certain observations which have been replied to and it awaits MHRA response. Our interaction with CFO indicates company has not received any intimation and indeed shipments have been dispatched in a business as usual manner for the past two months; it pointed that had otherwise been the case, shipments to UK might have been impacted from time of inspection till date. We estimate the revenues at risk due to any potential adverse action at ~Rs. 180-200cr which would account for ~17-19% of FY16E topline; moreover margins of revenue at risk would be similar to overall 23-24% EBIDTA, translating into an identical impact on operating profit. However, above is just an indication of potential damage to P&L in case such an event materializes and based on our interaction with company we do not foresee any need to incorporate the same into our estimates. We keep the faith for now based on our interactions with CFO and reiterate BUY with unchanged 2-year target of Rs155.
Warm Regards,
India Infoline Research Team
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