Alembic Pharmaceuticals Ltd. share price target

Domestic Formulations A Mixed Bag: The domestic formulations industry grew by 9.7% during the quarter and 9.8% for the year. The last 15-20 days of the March quarter were an issue due to COVID-19 and lockdown. Digital marketing, video calling had replaced the traditional mode of personalvisits and marketing.

5 July 2020 ALPM delivered a 14% CAGR in US sales to USD280m (43% of sales) on account of 58 launches over FY1620. Particularly, in FY20, ALPM garnered 49% YoY growth, led by new launches (22) and partly by regulatory concerns witnessed by peers. On a high FY20 base, we expect a 10% CAGR in US sales to USD340m over FY20 22. ALPM would ramp up filings across new dosages (Ophthalmology, General Injectables, Oncology Injectables, and Oral Solids). The considerable share of revenue from new capex / product development would reflect in overall growth in US sales 2HFY22 onward; thus, it forms a marginal portion of the business trajectory over FY2022. ALPM delivered 13% YoY growth in 4QFY20, reflecting the benefit of the pre-buying of medicines (in anticipation of shortage due to COVID-19) and partly of renewed strategy. While efforts to improve sales growth have been on track, performance could be dented on account of the COVID-19-led slowdown.

of capex is monetized from next fiscal. In the current disruptive environment, we reckon stocks with high certainty of earnings would command a disproportionate investorinterestandwidepremiumtosectoraverages.WebelieveAlembicPharma fitsthebillasitforaysintooncoandgeneralinjectablesandimprovestherevenue mixin3years.ExpectUSbusinesstoclock20%cagrexSartansovernext4yearsto touch ~US$450mn in FY24E. Domestic business should rebound and our recovery case is premised on strong close to Q4 FY20 as well as positive management commentary.WeassumemoderationingrossmarginthoughEBIDTAshouldpickup...

The company's revenue from Domestic Formulations (DF)grew by 13% to Rs.3.4 bn. US revenues grew by 84% on YoY basis to Rs. 5.8 bn. This has been on account of supply constraints in the Sartan space in the US market coupled with new launches. ROW markets grew by 61% to Rs. 1320 mn. API business degrew by 31% to Rs. 1550 mn during Q4 FY20.

Domestic sales comprise 31% of FY20 revenues with higher contribution from specialty (54% of domestic sales). However, despite having an established set-up, growth (FY16-20 CAGR of ~5%) has lagged the industry growth curve. The company is consciously focusing on this aspect with focus on overhauling of distribution channels (defocusing on trade...

Consecutive beat we raise FY21/FY22 EPS by 11-17%

ALPM remains on track in terms of finishing its large capex project (~INR25b) to enhance new dosage offerings and increase capacity requirements in the US Generics segment. ALPMs 4QFY20 revenues came in at INR12.1b, up 30% YoY, led by International Formulations (+80% YoY), supported by growth in the US segment (48% of sales; +84% YoY to USD75m) and the Non-US segment (11% of sales; +63% YoY). The gross margin expanded 140bp YoY to 78% owing to a superior product led by improved operating leverage (employee cost down -120bp YoY/other expenses down 520bp YoY as % of sales, offset by higher R&D; expense of For FY20, revenue/EBITDA/Adj.PAT stood at INR46.1b/INR12b/INR8.3b, largely led by strong traction in US generic. The US base business from already-approved products is likely to witness a quarterly run rate of USD70m (v/s USD50m up to 3QFY20) going forward.

Alembic Pharma (ALPM) reported a 31% EBITDA beat in Q4.

On the business front, despite the nationwide lockdown, domestic growth is expected to remain more or less stable. Exports growth, barring for one or two months due to congestion in all major ports globally, is also expected to remain strong due to 1) currency benefit, 2) slowdown in competition due to delay in new approvals that will be beneficial for existing players and 3) expected demand continuum across the world despite Covid-19. Some windfall is also expected in some critical productsa case in point is Hydroxychloroquine, a malaria drug that is likely to be repurposed as a prophylaxis for Covid-19 treatment in some cases....

In Q3FY20, total revenues of Alembic Pharma increased by 18.7percent YoY toRs. 12.1 bn.