Alembic Pharma Q3 Results Review - India, Export Formulation Drive Earnings: Motilal Oswal

Motilal Oswal Report

Alembic Pharmaceuticals Ltd. delivered a better-than-expected operational performance in Q3 FY24. A healthy show in formulation exports and the domestic formulation segment supported growth in sales/Ebitda.

Alembic Pharma continued to improve the base of its U.S. generics business. Robust demand led to strong off-take in non-U.S. exports.

We raise our earnings estimates by 2%/3%/4% for FY24/FY25/FY26 to factor in-

1. superior execution in animal healthcare segment,

2. new launches and increased reach in non-U.S. exports,

3. controlled research and development spending, and

4. better operating leverage.

We value Alembic Pharma at 22 times 12 months forward earnings to arrive at a target price of Rs 910.

Compared to two years of earnings decline over FY21-23, we expect Alembic Pharma to end FY24 on a strong note with 12%/33% Ebitda/earnings growth YoY.

Further, we expect a 16% earnings compound annual growth rate over FY24-26, led by a strong performance in its core markets, DF and exports.

However, we maintain our Neutral rating as this earnings upside is adequately captured in the current valuation.

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