Alembic Pharma Ltd
- CMP: Rs 600
- Target Price: Rs 632
- Recommendation: Book Partial Profits and HOLD remaining
Subdued Results; growth one more year away
Alembic Pharma Limited (APL) results were marginally below expectations due to muted growth both in domestic and international businesses. Overall sales for Q4FY17 grew by 18.3% to Rs 740 cr. For FY17 the company posted decline of 1% to Rs 3131 cr. For the full year International business declined by 15% however yoy numbers are not comparable as last year numbers included huge base of gAbilify sales. On QoQ basis, it declined by 10% due to higher competition in gAbilify and no new launches during the quarter. Domestic business grew by 6% yoy during the quarter and by 6.7% for the year to Rs 286 cr and Rs 1255 cr, impacted by demonetization and price control measures taken by the regulatory. EBITDA margins for the quarter declined to 18.2% from 18.9% in Q3FY17 and 23.1% in Q4FY16. The company is focusing on developing new capabilities like oral oncology, oncology injectibles, general injectibles and Dermatology for these it is investing heavily (the management has given capex guidance of Rs 700 cr for FY18) to build facilities for the same. The facilities are expected to be ready by end of FY18. We expect APL to report sales CAGR of 15% for FY18-19E with 21%/22% EBITDA margins respectively.
Valuations and Recommendation
We believe the company has successfully crafted a niche for itself in US markets and likely to remain a focus player. With new facilities (injectibles, derma and oncology) facilities coming up, we believe the company is poised for higher growth for future. However we expect FY18 to be year of consolidation as the company continues to invest in additional facilities and capabilities. Current rich valuations factor in much of the upside, hence we recommend investors to book partial profits and HOLD on the remaining stock for the price target of Rs 635 (20x FY19E).
Click here to read the full report
About Nirmal Bang
Founded in 1986 by Nirmal Bang, the Nirmal Bang is recognized as one of the largest retail broking houses in India, providing an array of financial products and services. Their retail and institutional clients have access to products such as equities, derivatives, commodities, currency derivatives, mutual funds, IPOs, insurance, depository services and PMS. The Group is headed by Mr. Dilip Bang and Mr. Kishore Bang.
For more information please write in to firstname.lastname@example.org
Disclaimer: The author has taken due care and caution to compile and analyse the data. The opinions expressed above are only the views of the author, and not a recommendation to buy or sell. Neither the author nor IndiaNotes.com accept any liability whatsoever arising from the use of any of the above contents.