Alembic Pharmaceuticals Ltd. share price target

Alembic Pharma's (Alembic) Q4FY19 result came broadly in line with expectations. The revenue/EBIDTA/PAT grew by 9%/3%/32% in 4QFY19. While the valsartan opportunity arising out of shortage in US continued to flow in this quarter, a muted performance in domestic formulation business (-1.3% YoY) and sequential decline in RoW business were key disappointments. Going forward, the growth in international business is likely to moderate in FY20 due to high base in FY19 and opportunities in key products (sartan based formulation and API) may reduce. Alembic spent nearly Rs18bn of capex over FY17-19 to set up advance facilities for manufacturing specialty products. The Capex...

The shortage in Sartans has moderated in the US and the co is not expected to gain from this in FY20E. Sustainable growth relies upon new launches in the US. We believe the benefits of new launches would be back-ended (post FY21E), stretching the payback period on the US$ 450mn spent by Alembic over the last ~3 years. Meanwhile, with a majority of the new plants nearing commissioning, the incremental cost would remain unabsorbed and dent profitability as revenue growth will be delayed. The valuations seem unfavorable at current levels of 22/18x FY20/21E P/E. Maintain Neutral. We maintain NEUTRAL on ALPM following a miss on our estimates. Our TP is revised at Rs 570/sh (18x FY21E EPS) following a 4% cut in FY21 EPS to account for higher R&D;.

Specialty contribution in the domestic branded space increased to 63% in FY19 from 54% in FY14. With 3800+ MRs at its disposal, the company enjoys a wide reach among doctors. We expect the speciality segment to grow at 15-20% CAGR in FY19-21E on the back of aggressive product launches and constant addition of new speciality segments & sub-segments....

Operationally a mixed bag; concerns loom over rising opex Strong API traction offset by India formulations weakness: Sales grew by a moderate 8.6% YoY to INR9.2b (in-line), with strong API sales (+16% YoY; 24% of sales) offset by the muted performances by the US (+8% YoY; 33% of sales) and India formulations (-1% YoY; 33% of sales) businesses. The contrasting gross and EBITDA margin movements: Gross margin improved 753bp YoY (+102bp QoQ) to 76.6%, driven by a better product mix. However, the EBITDA margin shrank 100bp YoY (-460bp QoQ) to 19.2% (our estimate:...

19 March 2019 Alembic Pharmaceuticals ALPMs capex investment has seen a significant increase from INR8.8b gross block in FY15 to INR11b over FY15-19E, which the company used to aggressively tap business opportunities in its key focus market, the US. But, due to its (a) track record of healthy launches, (b) ability to grab product-specific opportunities supported by a nimble supply chain, and (c) strong pipeline of products under development filings, ALPM remains confident of scaling the US business over the next 3-4 years. ALPM has about 190 projects under development Oral solids (~40-45%), Derma (~28%), and the remaining Onco-Injectables/general injectables. ALPM would be filing through the CB30 route to transfer a few products from its existing formulation unit at Panelav to a new unit at Jarod. ALPM has about 20 injectables (onco products) under development at its with exhibit batches planned in 2QFY20. It has about 20 Oral solids under development; exhibit batches have already commenced for a few products.

Maintain NEUTRAL with a TP of Rs 580 (18x Dec'20E EPS). This was the second consecutive quarter during which the US market experienced shortages in Sartans and other molecules. Benefitting from this, Alembic Pharma (ALPM) reported 21% YoY revenue growth. However, a sequential decline of 10% was due to lower Valsartan sales as compared to 2Q. EBITDA stood at Rs 2.4bn with margin at 23.8% (+147bps YoY). PAT at Rs 1.7bn was up 30%YoY.

Alembic Pharma's Q3FY19 results were better-than-expected on the profitability front whereas revenues were in line Revenues grew 21.2% YoY to | 1018.2 crore (I-direct estimate: | 1019.5 crore) on account of 44.1% YoY growth in the international business to | 448 crore (I-direct estimate: | 447.5 crore) led by sharp growth in ex-US businesses. Domestic formulations grew 4.6% to | 365 crore, came in line with I-direct estimates EBITDA margins improved 147 bps YoY to 23.8% (I-direct estimate:...

In Q3FY19, total revenues of Alembic Pharma increased by 21% YoY to Rs 10.2bn (below our estimates Rs 10.4 bn). The Company's operating margins increased from 22.3% to 23.8% YoY (our estimates 19.5%).

22 January 2019 Alembics 3QFY19 revenue shot up by ~21% YoY to INR10.2b (in line with est.), primarily led by the US business. Gross margin (GM) expanded by 260bp YoY due to superior product mix. EBITDA margin expanded by ~150bp YoY to 23.8%, primarily due to higher GM and lower R&D; expenses by ~70bp (as % of sales). This was partially off- set by higher employee expense by ~190bp (as % of sales). EBITDA grew by ~29% YoY to INR2.4b (v/s est. of INR2.2b), mainly led by healthy revenue growth and margin expansion. Interest expense stood at INR60m v/s INR8m YoY. PAT grew by ~30% YoY to INR1.7b (v/s est.

Revenues Outperform on shortage of Valsartan and Strong performance in non-regulated markets: In Q2FY19, total revenues of Alembic Pharma increased by 43% YoY to Rs 11.3bn (above our estimates Rs 9.7 bn). The Company's operating margins increased from 22.7% to 26.8% YoY (our estimates 19.3%). Its net profit increased by 65% YoY to Rs 2001 mn in Q2FY18 vis--vis our estimates of Rs 1225 mn.