Add Alkem Labs Ltd for the Target Rs. 5,755 by Choice Institutional Equities
Launch-led Growth Continues, but Margin Expansion to Moderate
While revenue is expected to sustain low to mid-teens growth, driven by new launches and scale-up of recent acquisitions, margin expansion is likely to moderate. Upcoming launches including Valsartan, Tolvaptan and select biosimilars should help offset pricing headwinds. We expect EBITDA margin in the range of 20–21% for FY27E, with a further ~100 bps expansion likely in FY28E. We revise FY27/28E EPS estimate downwards by 7.3%/7.8%, respectively, and continue to value the stock at 25x FY28E EPS. Our revised TP stands at INR 5,755 (earlier INR 5,995). We also see incremental upside potential from the successful ramp-up of the Medtech and CDMO verticals.
Margin Pressure Weighs on Q4 despite Revenue Beat
* Revenue grew 14.6% YoY / declined 3.6% QoQ to INR 36,033 Mn (vs. CIE estimate: INR 34,403 Mn).
* EBITDA grew 32.2% YoY / declined 37.5% QoQ to INR 5,174 Mn; margin expanded 191 bps YoY but contracted 780 bps QoQ to 14.4% (vs. CIE estimate: 17.3%).
* Adjusted PAT increased 3.6% YoY / declined 53.4% QoQ to INR 3,168 Mn (vs. CIE estimate: INR 4,637 Mn).
* Q4FY26 exceptional items included a INR 747 Mn impairment provision on select real estate investments and an incremental INR 603 Mn liability towards change in Labour Codes.
Chronic and Specialty Shift to Sustain Low-digit Growth
Revenue delivered low-teens growthin FY26, a trajectory we expect to continue, driven by new launches including Tolvaptan, biosimilars, continued domestic chronic launches and Semaglutide which was launched in March 2026. ALKEM is increasingly shifting its portfolio towards chronic and specialty-focussed products. The management projects India to continue outperforming IPM, while the US business is anticipated to deliver high single-digit growth. Overall, we expect revenue CAGR of ~12% over FY26–29E.
Margin Expansion to Moderate amid Cost and Pricing Headwinds
While margin expanded by 100 bps in FY26, further improvement is expected to moderate due to ongoing inflation in APIs, raw materials and packaging, supply chain disruption linked to the West Asia crisis and continued pricing pressure in the US generics market. However, this could be partly offset by scaleup of high-margin launches. We forecast EBITDA margin in the range of 20– 21% for FY27
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SEBI Registration no.: INZ 000160131
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