Alkem Laboratories Ltd. share price target

period due to changes in the distribution policy, adjusting for which domestic sales growth was in early teens. US business sales were up 19% YoY at INR4.8b. Other international business sales grew 20% YoY to INR1.2b. Margins supported by lower operating cost: Gross margin shrank 300bp YoY to 58.2% on account of product mix change (competition intensified for high-margin products). However, the EBITDA margin expanded 400bp YoY to 12.8% due to lower other expenses (-580bp YoY)/employee cost (-120bp YoY). EBITDA was up 81% YoY at INR2.3b due to high revenue growth and...

We initiate with a BUY for a price target of Rs. 2,306 representing an

26 March 2019 ALKEM has ramped up its US sales to 6x over FY13-18 on new launches, reasonable market share gains in existing products, and partly on low base. For 9MFY19, ALKEM delivered strong 34% YoY growth to ~USD200m. We expect growth in ALKEMs US business to remain intact despite competition in one of its key products; newer approvals should offset the decline in base business and aid growth in the US generics segment. We expect the base effect to smoothen out and ALKEM to be back on track with aggressive growth in its chronic portfolio and on major therapies in the acute category, thereby aiding 14% revenue CAGR over FY19-21E. Based on 23% earnings CAGR expected over FY19-21E and led by healthy performance in the DF segment, enhanced margins in the US generics business, and attractive on the stock. For 9MFY19, US sales stood at USD200m and saw 34% YoY growth.

Maintain BUY with a revised TP of Rs 2,340 (22x Dec-20E EPS). Alkems 3QFY19 performance was in line with our expectations. A softer acute season led to a 1% fall in the domestic business, while the 44% jump in the US helped in maintaining 10% plus YoY top line growth. Poor business mix (lower India sales) and increased raw material cost led to a ~680bps drop in gross margin. As a result, EBITDA margin shrunk 450bps YoY and EBITDA declined 13% to Rs 3.1bn. Reported PAT at Rs 2.1bn was up 14% YoY owing to higher taxes in 3QFY18

Maintain BUY with a TP of Rs 2,415 (22x Sep'20E EPS). Alkems 2QFY19 performance was ahead of expectation with EBITDA margin improving 614bps QoQ to 19% (100bps beat) and PAT coming in at Rs 2.6bn, down 19%YoY (16% beat). Revenues grew 3%YoY to Rs 19bn, in line with our estimates. Within segments, India business declined 6%YoY on a high base due to post-GST restocking last year, while US revenues grew 55%YoY to Rs 4.7bn, on the back of new product launches and currency tailwinds.

Alkem Laboratories Ltd Q2FY19 results Comment Revenue rose by 14.94% to Rs. 1918.92 Cr in Q2FY19 when compared to the previous quarter. Also, it rose by 3.22% when compared with Q2FY18.

2 November 2018 muted growth of 3%YoY to INR19.2b (v/s est. of INR17.5b) on back of 6% YoY decline in domestic formulation (DF, 69% of sales), which was off-set by strong 55% YoY growth in the US business (25% of sales). Gross margins declined by ~180bp YoY (flat QoQ) to ~60.2% due to increased share of relatively low margin US business. Increased other expenses and employee cost (up ~270bp and ~60bp, as percentage of sales) led to contraction of ~570bp YoY in EBITDA margin to 19% (our est. Sequentially, EBITDA margin has expanded ~610bp due to improved operating leverage. R&D; spend was INR1.1b, 5.5% of sales v/s 5.9% of sales in 1QFY19. PAT declined by ~21% YoY to INR2.

ff US FDA: Alkem is yet to receive The US FDA clearance for St. Louis facility. However, it has already received EIR for Daman unit (inspected in Mar'18), while the US FDA inspected its Baddi plant between 6-10th Aug-18 with zero observations....

Maintain BUY with a revised TP of Rs 2,410 (24x FY20E EPS) Alkems 1QFY19 results were largely below our estimates. Revenue at Rs 16.7bn, was up 28.9%YoY and 10.3%QoQ. EBITDA of Rs 2.1bn grew 127%YoY with margin coming up to 12.8%, up 550bps YoY. PAT at Rs 1.4bn was 115% higher than that in 1QFY18. The impressive growth is attributed to a low GST-hit base. EBITDA, margin, and PAT missed our estimates by 21%, 380bps, and 22% YoY respectively. Domestic growth was 25.7%.

Maintain BUY with a revised TP of Rs 2,445 (24x FY20E EPS). The fourth quarter is seasonally weak for ALKEM, and 4QFY18 was no different. The top-line grew 21% YoY but declined 13%QoQ to Rs 15.1bn. EBITDA margin at 7.5% and PAT at Rs 745mn missed our estimates by ~440bps and 46% respectively. R&D; spend during the quarter was significant (7.4% of sales vs 6.7% expected), with 11 ANDAs filed in 4QFY18. There was also MTM loss of Rs 283mn included in other expenses for real estate investments. Adjusted for this, EBITDA margin was at 9.4% in 4QFY18.