Add Alkem Laboratories Ltd For Target Rs.5,755 by Choice Institutional Equities Ltd
Launch Momentum and Margin Recovery Support Growth
We continue to maintain our view on the company and expect revenue to grow in the low teens, driven by new launches (including 2 launches in Q2), continued growth in chronic therapies and scale-up in CDMO. While CDMO contribution is unlikely to be meaningful in the near term, we anticipate margin to improve with easing API inflation and better scale from launches, projecting it to reach ~22% in FY27E, with a further ~100 bps expansion in FY28E. Upside to performance could come from a stronger specialty pipeline. We estimate Revenue/EBITDA/PAT CAGR of 12.8%/17.4%/12.4% over FY26– 29E and maintain our TP of INR 5,755 and ‘ADD’ rating.
Revenue Miss despite Strong QoQ Margin Expansion
* Revenue grew 10.9% YoY / 3.8% QoQ to INR 37,402 Mn (vs. CIE estimate of INR 38,483 Mn).
* EBITDA grew 3.7% YoY / 48.1% QoQ to INR 7,661 Mn; margin contracted 144 bps YoY but expanded 612 bps QoQ to 20.5% (vs. CIE estimate of 19.5%).
* Adjusted PAT declined 20.4% YoY but increased 64.1% QoQ to INR 5,200 Mn (vs. CIE estimate of INR 5,439 Mn).
Healthy Revenue Recovery; FY27 Outlook Remains Intact
Revenue saw a healthy recovery; however, the overall FY27E outlook remains unchanged. We project ~13% revenue CAGR over FY26–29E, driven by the shift towards chronic therapies in domestic markets, CDMO scale-up in the US and continued growth across other geographies. The launch pipeline includes an oncology biosimilar in Europe (Q2FY27) and Denosumab in the US, among other. Opto Tech integration is also expected to start next quarter.
Margin Forecast to see an ~200 bps Expansion on Better Mix
EBITDA margin improved QoQ during thiss quarter, supported by better demand seasonality in the monsoon. We expect margin to sustain at ~22% in FY27E, driven by better demand and mix, high-value launches in biosimilars and CDMO and continued scale-up of chronic therapies in the domestic market.
For Detailed Report With Disclaimer Visit. https://choicebroking.in/disclaimer
SEBI Registration no.: INZ 000160131
