Alkem Labs Q3 Results Review - India, International (ex-U.S.) Businesses Outperforms: Motilal Oswal

Motilal Oswal Report

Alkem Laboratories Ltd.'s delivered better-than-expected Q3 FY24 earnings. While sales were largely in line with estimates, margin came in above our estimate owing to controlled cost base. Alkem Laboratories continued to exhibit strong growth momentum in the international (excluding-U.S.) business.

We raise our earnings estimates by 10%/5%/6% for FY24/FY25/FY26 to factor in reduced operating costs/better productivity, a robust show in international business, and an improved outlook for the biosimilar segment.

We value Alkem Laboratories at 25 times 12 million forward earnings to arrive at a target price of Rs 5,160.

We expect 12%/14%/9% YoY growth in revenue/Ebitda/profit after tax over FY24-26, driven by a 13%/21%/7% sales compound annual growth rate in domestic formulation, international (ex-U.S.), and the U.S. segments. We also expect a 60 basis points margin improvement.

While growth prospects remain better in key segments, we maintain our 'Neutral' rating on the stock as the current valuation adequately factors in the upside in earnings.

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