IGI Logo

Result Highlights

* Q4 revenues increased by 7% YoY driven by robust India sales (+17% YoY, trade generic business reported good growth), US business de‐grew by 10% YoY which was due lower acute sales, pre‐buying in last March

* Gross margins expanded by 63bps YoY, but declined QoQ on Rs800mn inventory provision in US business; higher staff cost and decline in US sales led to margin contraction of 150 bps YoY  

* Company guided to a strong Q1 FY22 on back of surge in vitamins and anti‐biotics sales due to COVID related complications  

* Overall guidance of mid‐teens growth in domestic business and margin gain of 200bps on FY20 base (as FY21 was exceptionally low on costs)

Our view:

An inventory hit of Rs800mn impacted US business in Q4 but overall, we reckon US to grow 20% in FY22 on back of pending 7‐8 launches of PY + current year launches. While not elaborated, there could be support from at‐risk and launches with CGT (low generic competition) designation. With US margin at double digit, high growth in FY22 would translate in to better EBIDTA support. Domestic business would clock 16% growth on low base of FY21 with vitamins & minerals driving growth in Q1 FY22 followed by acute portfolio for rest of the year.

We reckon there could be upside risk to margin if US and India surprises on growth, which can drive stock outperformance from hereon. On the cost front, we build in over 30% rise in other expenses ex‐R&D. Based on FY21 actual, we marginally lower FY22/23 EPS by 4%/3% but retain BUY with unchanged TP Rs3,600. Alkem trades at attractive valuation with a cash rich balance sheet and solid growth visibility. Key risk would be slower than expected growth in current year which would pull down FY23 estimates. 

To Read Complete Report & Disclaimer Click Here

Please refer disclaimer at https://yesinvest.in/privacy_policy_disclaimers
SEBI Registration number is INZ000185632

Above views are of the author and not of the website kindly read disclaimer