Maintain BUY with a revised TP of Rs 2,435 (25x Dec-19E EPS). Alkem Labs (ALKEM) followed up the bumper 2Q performance with another strong quarter in 3QFY18. Revenue came in at Rs 17.4bn, up 17% YoY, with the domestic business growing 15% YoY. EBITDA came in at 3.6bn, up 34% YoY. The margin was 20.7% (up ~250bps YoY), driven up largely by a strong gross margin and operating leverage. Improved gross margin (64%, +200bps QoQ) was largely owing to the product mix in India, with chronic contributing well in 3QFY18. However, mgt expects gross margin to moderate to sustainable levels of 60-62%. PAT came in at Rs 1.7bn, down 27% YoY, impacted by a higher tax rate (45.6% vs 7.5%). The one-off DTA adjustment after the change in the US tax laws was ~Rs 450mn.