Please refer to important disclosures at the end of this report
1
Alkem Laboratories Ltd. (Alkem) is a Mumbai based pharma company engaged
in manufacturing and marketing of generic drugs, APIs and neutraceutical
products. Its ANDA pipeline has not seen strong traction this year so far, despite
which Alkem maintains guidance of high single digit ANDA launches going
ahead. This justifies the ~29-30% growth in the US business over next two years.
Alkem is expected to continue its outperformance vs. industry due to strong
growth in its acute and chronic segments. Both segments are expected to grow at
CAGR of 16% and 30% respectively in next 3 years due to higher sales of majo
r
brands and market share gains. Alkem’s ANDA pipeline increased 2.5x from
31 ANDAs in FY12 to 76 ANDAs in H1FY17. In next three years compan
y
expects increased ANDA launches on the back of approval to 2/3rd of its
pipeline. Alkem’s operating performance is expected to improve with better sales
mix (increasing exports) and market share gains in chronic segment. The
company has already seen margin improvement and with rising profitability o
f
US business, we estimate 70-100bps margin expansion. The company has
reduced its debt and debt to equity (D/E) stands at 0.2x in FY16 compared to
0.4x in FY15. The company has show a reduction in its working capital cycle
from 82days in FY15 to 65days in FY16 which is a positive sign. The company in
past 3 years has reported a healthy RoE of 17% and profit growth at a CAGR o
f
21% which is a good sign going ahead for the company. Hence Buy.
BUY
CMP `1,970
Stock Info
Sector
Net Debt (
`
cr) 80
Beta
Bloomberg Code
Shareholding Pattern (%)
Promoters 66.9
MF / Banks / Indian Fls 3.3
FII / NRIs / OCBs 3.7
Indian Public / Others 26.1
Abs. (%) 3m 1yr 3yr
Sensex 7.0 19.5 38.2
Alkem Lab. 19.8 50.4 NA
.
52 Week High / Low 2,015/1,175
Avg. Daily Volume 10,246
Pharmaceuticals
Market Cap (
`
cr) 23,557
2
BSE Sensex 28,156
Nifty 8,725
Face Value (
`
)
Reuters Code ALKE.BO
ALKEM@IN
0.3
Vaibhav Agrawal
022 – 3935 7800 Ext: 6808
A
lkem Laboratories
Others | Pharmaceuticals
February 16, 2017
Alkem Laboratories | Pharmaceuticals
February 16, 2017
2
Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com
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Disclosure of Interest Statement Alkem Laboratories
1. Financial interest of research analyst or Angel or his Associate or his relative No
2. Ownership of 1% or more of the stock by research analyst or Angel or associates or relatives No
3. Served as an officer, director or employee of the company covered under Research No
4. Broking relationship with company covered under Research No
Ratings (Based on expected returns Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)
over 12 months investment
p
eriod
)
: Reduce
-5% to -15%
)
Sell
(
< -15
)