Buy Alkem Labs Ltd For Target Rs. 4,200 - Yes Securities
Follow us Now on Telegram ! Get daily 10 - 12 important updates on Business, Finance and Investment. Join our Telegram Channel
https://t.me/InvestmentGuruIndiacom
Download Telegram App before Joining the Channel
Our view
Alkem’s domestic business is set to sustain healthy growth looking beyond the COVID‐ led surge in vitamins as key segments like anti‐infectives, trade generics and chronic drive expansion. With the onboarding of ~2k MRs, productivity improvement in chronic would support domestic margin. US business to rebound on back of decent launches like Famotidine + Ibuprofen & Mesalamine after a lackluster FY21 and expect a 14% compounded growth over next few years. Q2 margin might be impacted due to delayed effect of higher API prices in Q4 FY21’ albeit, it is unlikely to disrupt an estimated ~110bps annual rise in margin on base of FY20 till FY24. Our confidence on margin stems from a double digit topline growth and a lower cost inflation coupled with R&D at ~6% of sales. We introduce and roll over to FY24 EPS and continue to value Alkem at an unchanged ~23x PE for a revised TP Rs4,200 (earlier Rs3,600). Retain BUY on the stock. We continue to view stability of margin in a large domestic portfolio, strong cash generation characteristics and manageable US scale as justified drivers for further rerating.
Result Highlights
* India business beats on revenue driven by low base and surge in vitamins usage
* Write off in US business following similar one in Q4 lead to lower gross margin yoy
* Guides to high teens growth – not a surprise ‐ in FY22 while margin levers in the form of chronic scale up, better US growth to drive steady OPM upside
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
.jpg)
