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Alkem Laboratories manufactures formulations as well as API, has a strong foothold in India and is one of the leading player in the US market. It has 19 manufacturing facilities and 6 R&D centers in India and US.

Market leader in various therapeutic areas

Alkem has a strong presence in India across various therapeutic areas. It has maintained its leadership position in anti-infectives for the last 15 years and is among the Top 3 players in gastro as well as the Pain division, through brand-building efforts and new launches. Apart from this, the chronic segment is picking up pace and with an increase in revenue, it should result in an improvement in margins due to high operating leverage..

Business restructuring underway

The company decided to close down the St.Louis plant due to structural changes in the US market, which should lead to cost savings of Rs.80-100cr in FY24E. Alkem has seen a significant, almost double-digit price erosion of its products in the US in FY23. Restructuring in the US and healthy growth in India should lead to improvement in the return ratios of the company

Scope for margin expansion

Alkem has invested in manpower with an addition of 3,000 MRs in the last 3 years to 12,000 to expand its reach. Going forward, better productivity from this investment should result in higher operating leverage. Apart from this, with the cost savings initiatives by the company, lower freight charges and steady raw material prices, management is confident of the increase in EBITDA margins by ~200 bps to 16% in FY24E.

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