Alkem Laboraties
Estimate change
TP change
Rating change
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6 June 2020
4QFY20 Results Update | Sector: Healthcare
CMP: INR2,396
TP: INR2850 (+19%)
Buy
Healthy US sales/better operating leverage drive earnings
ANDA filings/successful compliance improve visibility for US growth
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Financials & Valuations (INR b)
Y/E MARCH
2020E 2021E
83.4 90.3
Sales
15.0 17.2
EBITDA
11.4 12.3
Adj. PAT
EBIT Margin (%)
15.1 16.5
95.4 103.3
Cons. Adj. EPS (INR)
49.5
8.5
EPS Gr. (%)
515.3 595.3
BV/Sh. (INR)
Ratios
Net D:E
0.1
0.0
19.7 18.6
RoE (%)
17.6 16.4
RoCE (%)
Payout (%)
22.5 22.5
Valuations
25.0 23.1
P/E (x)
19.4 16.6
EV/EBITDA (x)
Div. Yield (%)
0.8
0.8
FCF Yield (%)
0.7
3.3
3.5
3.2
EV/Sales (x)
ALKEM IN
120
286.5 / 3.9
2882 / 1660
-19/30/51
197
Overall performance better than estimates
ALKEM ended FY20 on strong note – earnings were up 50% YoY, led by
healthy growth in the US (a key market), domestic formulation (DF) and
improved operating leverage. While the COVID-19 pandemic could affect DF
growth in the near term and subsequently impact earnings, we believe that
ALKEM has enough levers (new launches/increased market share in DF/the
US and minimal regulatory risk) to strengthen its earnings trajectory.
We cut our EPS estimates by 6%/4% for FY21/FY22E to factor in the near-
term weakness in the DF segment. Accordingly, we revise our price target to
INR2,850 on 22x 12-month forward earnings. We remain positive on ALKEM
due to robust ANDA pipeline/minimal regulatory risk in the US and
sustained outperformance in DF. Maintain
Buy.
4QFY20 revenues grew 10.6% YoY to INR20.5b (v/s est. INR18.1b).
The US business increased 26% YoY to INR6.1b (29.6% of sales); Other
International business grew ~14.2% YoY to INR1.5b (7% of sales).
DF grew at a subdued rate of ~3.3% YoY to INR12.6b (61.4% of sales).
Gross Margin declined by ~180bp YoY to 56.3% YoY on changed product
mix.
However, EBITDA margin improved by ~210bp YoY to 14.8% (v/s est. 15.1%),
mainly due to lower staff costs/other opex (-270bpYoY/-110bp YoY as % of
sales). EBITDA grew 28.4% YoY to INR3b (v/s est. INR2.7b).
R&D expense stood at INR1.3b, 6.1% of sales for the quarter.
In 4QFY20, ALKEM had one-offs of INR180m as accelerated depreciation.
Adj. PAT grew 43% YoY to INR2.1b (v/s est. INR1.7b), and was higher than
EBITDA growth due to higher other income.
For FY20, revenues/EBITDA/Adj. PAT grew 30%/42%/50% YoY to
INR83.4b/INR15b/INR11.4b, led by better traction in DF/the US.
Spillover of INR1-1.5b revenue in DF to be accounted in 1QFY21.
The company intends to file 12-15 ANDAs and launch 10 ANDAs in FY21.
ALKEM has guided for maintaining MR strength for the DF business in FY21.
It has also guided for low-to-mid-teen YoY growth in US sales over 12-24
months.
Despite the COVID-19 led headwinds, ALKEM remains confident of
improving EBITDA margin in FY21.
For FY21, ALKEM expects effective tax rate at 12-14% and capex at INR3.5b.
We expect 15% earnings CAGR over FY20-22E, led by 16%/10% sales CAGR
in the US/DF generics on new launches and better traction in existing
products.
The reduced promotional expense in DF and improving profitability in the
US should drive 220bp margin expansion over FY20-22E. We value ALKEM at
22x 12-month forward earnings to arrive at TP of INR2,850. Re-iterate
Buy.
2022E
103.1
20.7
15.0
17.7
125.7
21.7
692.7
-0.1
19.5
17.4
22.5
18.9
13.5
1.0
3.0
2.7
Highlights from management commentary
Shareholding pattern (%)
As On
Promoter
DII
FII
Others
Mar-20 Dec-19 Mar-19
65.9
66.0
66.0
11.8
12.0
5.4
3.6
2.7
2.4
18.7
19.2
26.2
Valuation and view
FII Includes depository receipts
Research Analyst: Tushar Manudhane
(Tushar.Manudhane@motilaloswal.com); +91 22 5036 2498
Hitakshi Chandrani
(Hitakshi.Chandrani@MotilalOswal.com); +91 22 6129 1557 /
Bharat Hegde
(Bharat.Hegde@motilaloswal.com)
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.
 Motilal Oswal Financial Services
Alkem Laboraties
Quarterly Perf. (Consolidated)
Y/E March
Net Revenues
YoY Change (%)
EBITDA
YoY Change (%)
Depreciation
EBIT
YoY Change (%)
Interest
Other Income
PBT before EO Exp
EO Exp/(Inc)
PBT
Tax
Rate (%)
PAT (pre Minority Interest)
Minority Interest
Reported PAT
YoY Change (%)
Adj Net Profit
YoY Change (%)
1Q
16,695
28.9
2,142
127.0
425
1,718
169.5
163
163
1,718
1,718
345
20.1
1,373
11
1,362
1,362
130.8
FY19
2Q
3Q
19,189 19,263
2.9
10.7
3,637
3,131
-21.0
-13.0
458
477
3,179
2,654
-25.4
-17.7
164
154
240
245
3,255
2,745
3,255
656
20.2
2,599
60
2,540
2,540
-16.1
2,745
526
19.2
2,219
29
2,190
2,190
8.4
4Q
18,530
24.2
2,361
79.8
573
1,788
96.6
66
76
1,798
-23
1,821
283
15.7
1,538
31
1,507
1,484
74.8
1Q
18,495
10.8
2,645
23.5
558
2,087
21.5
161
175
2,100
2,100
227
10.8
1,873
18
1,855
1,855
36.2
FY20
2Q
3Q
22,640 21,818
18.0
13.3
4,752 4,533
30.7
44.8
564
595
4,188 3,938
31.7
48.4
178
170
314
279
4,325 4,046
226
4,098 4,046
293
147
6.8
3.6
3,805 3,900
97
80
3,708 3,820
3,918
54.3
3,481
58.9
4Q
20,490
10.6
3,030
28.4
631
2,400
34.2
142
275
2,533
180
2,353
438
17.3
1,915
28
1,888
2,125
43.3
FY19
73,677
14.6
11,271
6.7
1,932
9,339
2.2
546
724
9,517
-23
9,539
1,810
19.0
7,729
131
7,598
7,575
31.6
FY20
83,444
29.7
14,960
41.6
2,348
12,612
38.0
651
1,042
13,004
406
12,598
1,105
8.5
11,493
222
11,271
11,379
50.2
Var
4QE %
18,080 13.3
-2.5
2,738 10.7
15.4
582
2,156
19.8
168
218
2,206 14.8
2,206
578
26.2
1,628
-46
1,674 12.8
1,674 28.6
12.0
(INR m)
Key performance Indicators (Consolidated)
Y/E March
FY19
INRm
1Q
2Q
3Q
India formulations
10,906 13,184
12,475
YoY Change (%)
25.7
4.9
(0.7)
Us generics
4,237
4,725
5,182
YoY Change (%)
43.0
31.5
44.3
International (Ex-US)
1,242
1,084
1,350
YoY Change (%)
13.4
1.5
26.4
Cost Break-up
RM Cost (% of Sales)
39.9
38.6
41.4
Staff Cost (% of Sales)
20.3
17.1
18.0
R&D Expenses(% of Sales)
5.9
5.5
6.2
Other Cost (% of Sales)
21.0
19.9
18.1
Gross Margins(%)
60.1
61.4
58.6
EBITDA Margins(%)
12.8
19.0
16.3
EBIT Margins(%)
10.3
16.6
13.8
4Q
12,176
26.8
4,822
18.4
1,275
9.4
41.9
18.8
7.5
19.1
58.1
12.7
9.7
1Q
12,222
12.1
4,817
13.7
1,095
(11.9)
38.5
21.1
5.6
20.5
61.5
14.3
11.3
FY20
2Q
3Q
15,503 14,239
17.6
14.1
5,276
5,837
11.7
12.6
1,415
1,416
30.5
4.9
38.9
17.2
5.5
17.4
61.1
21.0
18.5
38.2
18.1
5.5
18.0
61.8
20.8
18.0
FY19
4Q
12,576
3.3
6,068
25.8
1,455
14.1
43.7
16.1
6.1
19.3
56.3
14.8
11.7
48,742
8.6
18,967
38.8
4,950
6.0
40.0
18.5
6.3
20.0
60.0
15.2
12.6
FY20
54,540
11.9
21,997
16.0
5,382
8.7
39.8
18.0
5.7
18.6
60.2
17.9
15.1
Management call highlights
ALKEM expects to outperform industry by 200-300bp in FY21.
26% of DF is under NLEM.
Expect pick-up in acute therapy related off-take in 3-4 months.
ALKEM expects trade generics to deliver double-digit growth in FY21.
The Gross Margin impact for the quarter is mainly due to change in the product
mix, rather than on increased RM cost.
Debt is higher due to increased dividend and working capital loans.
6 June 2020
2
 Motilal Oswal Financial Services
Alkem Laboraties
Key exhibits
Exhibit 1: Domestic business grew 3.3% YoY in 4QFY20
26
12
India sales (INR b)
27
13.2
-6
9.6
10.9
-1
12.5
12.2
12.2
15.5
14.2
12
Growth (%)
18
14
3
12.6
4.1
0.6
Exhibit 2: US sales saw healthy growth of 11.7% YoY
US sales (INR b)
40.0
43.0
55.3
44.3
18.4
4.7
5.2
4.8
4.8
5.3
13.7
5.8
11.7
6.1
Growth (%)
4.2
6.1
Source: MOFSL, Company
Source: MOFSL, Company
Exhibit 3: Cumulative US ANDA filings
142
Exhibit 4: Robust ANDA pipeline
US Filings
Total ANDAs filed
ANDAs filed in FY20
NDAs
# Nos.
142
18
2
Source: MOSL, Company
87
42
13
Final Approval
Tentative
Approvals
Pending Total
Total
Source: MOSL, Company
Valuation view
DF remains on track to outperform industry
ALKEM delivered 14% CAGR in DF sales to INR55b over FY15-20; it has dominant
3.5% market share in such a fragmented industry, and continues to grow better
than industry in the segment.
ALKEM has maintained 25-30% sales CAGR in chronic categories (15% of DF
sales) like Anti-Diabetic/Cardiac/CNS/Derma and established its presence in
acute therapies (85% of DF sales) like Anti-Infective/Gastro-Intestinal/Pain/
VMNs.
The deferral of elective procedures on the back of COVID headwinds is expected
to impact its business in the near term. Over FY20-22E, we expect ALKEM to
garner 10% CAGR in DF sales to INR66b.
US biz to grow on steady stream of filings/launches (27% of total sales)
ALKEM has delivered 24% CAGR in US sales to USD310m over FY15-20. It has
144 ANDAs filed till date with only half of them commercialized in the US. This
implies that the company has enough ammunition to not only offset the impact
of price erosion but to also deliver growth over the next 3-4 years. The company
aims to maintain its pace of 12-15 filings per year over the next 3-4 years. Its St.
3
6 June 2020
 Motilal Oswal Financial Services
Alkem Laboraties
Louis/Baddi formulation facilities have received Establishment Inspection
Reports (EIRs) in May’20/Mar’20. ALKEM now has EIRs for all its facilities
supplying to the US. Based on product pipeline and minimal regulatory risk in
the US, we expect ALKEM’s US sales to deliver 16% CAGR at ~USD420m over
FY20-22E.
Valuation and view
We cut our EPS estimates by 6%/4% for FY21/FY22E to factor in the weakness in
DF segment over the near term. Accordingly, we revise our price target to
INR2,850 on 22x 12-month forward earnings.
We expect 15% earnings CAGR over FY20-22E, led by 16%/10% sales CAGR in
the US/DF generics on new launches and better traction in existing products.
The reduced promotional expense in DF and improving profitability in the US
should drive 220bp margin expansion over FY20-22E. Re-iterate
Buy
Exhibit 6: P/B chart
6.0
5.0
4.0
4.0
3.4
3.0
P/B (x)
Min (x)
Exhibit 5: P/E chart
44.0
36.0
28.0
20.0
12.0
P/E (x)
Min (x)
Avg (x)
+1SD
37.5
30.6
24.7
18.8
16.2
Max (x)
-1SD
Avg (x)
+1SD
5.4
4.6
Max (x)
-1SD
3.6
19.9
3.0
2.0
Source: MOFSL, Company, Bloomberg
Source: MOFSL, Company, Bloomberg
6 June 2020
4
 Motilal Oswal Financial Services
Alkem Laboraties
Story in charts
Exhibit 7: Growth led by India sales
Sales (INR b)
28.9
19.2
19.2
10.7
14.9
16.7
2.9
19.3
18.5
24.2
18.0
10.8
18.5
22.6
13.3
21.8
10.6
20.5
9.1
10.0
11.8
11.3
10.8
11.4
13.8
13.5
YoY growth (%)
61.2
60.1
Exhibit 8: Gross margin declined 180bp YoY
Gross Profit (INR b)
61.4
58.6
58.1
61.5
Gross margin (%)
61.1
61.8
56.3
11.5
Source: Company, MOFSL
Source: Company, MOFSL
Exhibit 9: EBITDA margin expanded 210bp YoY
EBITDA (INR b)
19.0
12.8
8.8
1.3
2.1
3.6
3.1
16.3
EBITDA margin (%)
21.0 20.8
12.7
14.3
14.8
Exhibit 10: EPS grew 26% YoY to INR17.7 in 4QFY20
EPS (INR/sh)
31.0
21.3
2.6
4.8
4.5
3.0
5.6
11.4
16.9
14.0
15.5
31.9
17.7
2.4
Source: Company, MOFSL
Source: Company, MOFSL
Exhibit 11: Expect revenue CAGR of 11% over FY20-22E
Revenue (INR b)
Exhibit 12: Expect India sales CAGR of 10% over FY20-22E
India business (INR b)
37.9
50.5
58.5
64.3
73.6
83.4
90.3
103.1
23.6
28.3
36.5
42.2
44.9
48.7
54.5
58.9
66.0
Source: Company, MOFSL
Source: Company, MOFSL
6 June 2020
5
 Motilal Oswal Financial Services
Alkem Laboraties
Story in charts
Exhibit 13: US sales to be driven by new launches
US sales (INRb )
53.2
53.3
38.8
21.5
6.5
9.9
12.0
16.0
19.0
22.0
19.9
26.4
19.6
31.5
YoY Growth (%)
Exhibit 14: US contribution to sales increasing gradually
% of sales
17.1
19.9
20.8
21.6
26.1
26.9
28.9
30.3
13.6
13.7
Source: Company, MOFSL
Source: Company, MOFSL
Exhibit 15: R&D expense to be 5.5-6% of sales over FY20-22E
R&D expense (INR b)
4.5
5.5
4.3
5.7
6.3
As % of sales
5.7
5.8
5.9
Exhibit 16: Better business mix to drive profitability
EBITDA (INR b)
16.9
17.1
16.4
EBITDA margin (%)
17.9
19.1
20.1
14.4
15.2
1.7
2.1
3.2
3.6
4.6
4.7
5.2
6.1
5.4
8.5
10.0
10.6
11.2
15.0
17.2
20.7
Source: Company, MOFSL
Source: Company, MOFSL
Exhibit 17: Improving return ratios
RoE (%)
25.2
18.4
14.6
18.9
21.9
20.1
15.1
13.0
14.8
13.6
17.6
RoCE (%)
19.7
Exhibit 18: Expect earnings CAGR of 15% over FY20-22E
EPS (INR/sh)
18.6 19.5
16.4 17.4
38.7
70.4
74.6
58.9
63.8
95.4
103.3 125.7
Source: Company, MOFSL
Source: Company, MOFSL
6 June 2020
6
 Motilal Oswal Financial Services
Alkem Laboraties
Financials and Valuations
Consolidated - Income Statement
Y/E March
Total Income from Operations
Change (%)
EBITDA
Margin (%)
Depreciation
EBIT
Int. and Finance Charges
Other Income
PBT bef. EO Exp.
EO Items
PBT after EO Exp.
Current Tax
Deferred Tax
Tax Rate (%)
Less: Mionrity Interest
Reported PAT
Adjusted PAT
Change (%)
Margin (%)
FY14
31,260
25.3
4,100
13.1
523
3,578
931
1,653
4,300
0
4,300
25
-79
-1.2
0
4,353
4,353
13.4
13.9
FY15
37,887
21.2
5,445
14.4
703
4,742
811
1,810
5,741
-574
5,167
85
457
10.5
0
4,625
5,139
18.1
13.6
FY16
50,479
33.2
8,533
16.9
933
7,599
712
2,397
9,284
0
9,284
1,762
0
19.0
114
7,409
8,419
63.8
16.7
FY17
58,525
15.9
9,990
17.1
1,012
8,978
452
1,120
9,646
0
9,646
600
0
6.2
126
8,920
8,920
6.0
15.2
FY18
64,312
9.9
10,566
16.4
1,430
9,136
553
960
9,542
0
9,542
2,876
0
30.1
75
6,309
7,040
-21.1
10.9
FY19
73,677
14.6
11,275
15.3
1,932
9,339
546
724
9,517
23
9,539
1,810
0
19.0
131
7,598
7,575
7.6
10.3
FY20
83,444
13.3
14,960
17.9
2,348
12,612
651
1,042
13,004
-406
12,598
1,105
0
8.8
222
11,271
11,379
50.2
13.6
FY21E
90,315
8.2
17,205
19.1
2,288
14,917
1,197
677
14,397
0
14,397
1,800
0
12.5
251
12,346
12,346
8.5
13.7
FY22E
103,059
14.1
20,715
20.1
2,516
18,199
1,164
762
17,797
0
17,797
2,492
0
14.0
284
15,022
15,022
21.7
14.6
INR m
Consolidated - Balance Sheet
Y/E March
Equity Share Capital
Total Reserves
Net Worth
Minority Interest
Deferred Tax Liabilities
Total Loans
Capital Employed
FY14
120
25,730
25,850
0
781
11,284
37,915
9,797
1,903
0
5,880
25,414
6,203
3,669
2,063
13,478
5,251
3,057
1,267
926
20,163
172
37,915
FY15
239
29,752
29,991
857
1,256
13,059
45,162
11,429
3,421
0
4,808
33,008
7,842
5,271
7,908
11,987
7,796
4,619
1,667
1,510
25,212
292
45,162
FY16
239
36,681
36,920
950
10
5,876
43,756
10,310
4,185
1,724
5,086
28,878
9,094
5,675
7,809
6,300
11,589
5,805
3,908
1,877
17,288
5,162
43,756
FY17
239
44,437
44,676
1,152
5
6,539
52,373
13,945
4,026
2,993
5,530
32,225
12,060
7,136
3,993
9,036
13,308
7,414
3,628
2,266
18,917
6,963
52,373
FY18
239
48,399
48,638
1,216
17
8,920
58,790
18,733
4,103
3,810
4,443
39,012
14,422
10,805
5,768
8,017
17,866
9,607
5,517
2,742
21,145
6,556
58,790
FY19
239
54,154
54,393
1,326
3
9,026
64,748
21,056
4,248
4,930
3,236
41,535
14,999
12,484
6,616
7,437
17,334
9,623
4,436
3,275
24,202
7,076
64,748
FY20
239
61,368
61,607
1,483
0
16,628
79,717
23,063
6,017
3,630
2,614
54,784
18,188
16,494
10,922
9,180
19,716
9,541
6,108
4,067
35,068
9,326
79,717
FY21E
239
70,934
71,173
1,483
0
16,628
89,284
25,429
6,017
2,476
2,614
66,599
20,431
19,795
16,437
9,936
23,178
10,185
6,611
6,382
43,421
9,326
89,283
FY22E
239
82,573
82,812
1,483
0
16,628
100,923
26,894
6,017
2,495
2,614
79,927
23,237
24,565
20,788
11,338
26,350
11,471
7,544
7,335
53,577
9,326
100,923
INR m
Net Fixed Assets
Goodwill on Consolidation
Capital WIP
Total Investments
Curr. Assets, Loans&Adv.
Inventory
Account Receivables
Cash and Bank Balance
Loans and Advances
Curr. Liability & Prov.
Account Payables
Other Current Liabilities
Provisions
Net Current Assets
Deferred Tax assets
Appl. of Funds
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7
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Financials and Valuations
Ratios
Y/E March
Basic (INR)
EPS
Cash EPS
BV/Share
DPS
Payout (%)
Valuation (x)
P/E
Cash P/E
P/BV
EV/Sales
EV/EBITDA
Dividend Yield (%)
FCF per share
Return Ratios (%)
RoE
RoCE
RoIC
Working Capital Ratios
Asset Turnover (x)
Inventory (Days)
Debtor (Days)
Creditor (Days)
Leverage Ratio (x)
Debt/Equity
FY14
36.4
40.8
216
2.0
6.4
65.4
58.4
11.0
9.4
71.7
0.1
15.9
18.3
14.2
13.7
0.8
72
41
36
0.4
FY15
38.7
48.9
251
4.0
12.3
61.6
48.7
9.5
7.6
53.2
0.2
16.1
18.4
14.6
13.6
0.8
76
49
45
0.2
FY16
70.4
78.2
309
12.7
24.7
33.8
30.4
7.7
5.6
33.1
0.5
39.5
25.2
18.9
20.0
1.2
66
40
42
-0.1
FY17
74.6
83.1
374
6.0
9.7
31.9
28.7
6.4
4.9
28.7
0.3
-13.7
21.9
20.1
24.4
1.1
75
45
46
0.1
FY18
58.9
70.9
407
15.0
34.3
40.4
33.6
5.9
4.5
27.2
0.6
-34.4
15.1
13.0
15.1
1.1
82
61
55
0.1
FY19
63.8
80.0
455
15.0
28.5
37.3
29.8
5.2
3.9
25.7
0.6
21.1
14.8
13.6
15.8
1.1
74
62
48
0.0
FY20
95.4
115.1
515
17.9
22.5
25.0
20.7
4.6
3.5
19.4
0.8
17.3
19.7
17.6
20.5
1.0
80
72
42
0.1
FY21E
103.3
122.4
595
19.6
22.5
23.1
19.5
4.0
3.2
16.6
0.8
75.8
18.6
16.4
20.0
1.0
83
78
41
0.0
FY22E
125.7
146.7
693
23.9
22.5
18.9
16.2
3.4
2.7
13.5
1.0
70.4
19.5
17.4
21.9
1.0
82
85
41
-0.1
Consolidated - Cash Flow Statement
Y/E March
OP/(Loss) before Tax
Depreciation
Interest & Finance Charges
Direct Taxes Paid
(Inc)/Dec in WC
CF from Operations
Others
CF from Operating incl EO
(Inc)/Dec in FA
Free Cash Flow
(Pur)/Sale of Investments
CF from Investments
Issue of Shares
Inc/(Dec) in Debt
Interest Paid
Dividend Paid
CF from Fin. Activity
Inc/Dec of Cash
Opening Balance
Closing Balance
FY14
4,300
523
-555
-1,111
-364
2,793
107
2,900
-1,004
1,897
25
-4,792
0
-4,732
-914
-319
-6,000
-7,892
9,955
2,063
FY15
5,142
703
-1,196
-1,056
-963
2,630
652
3,281
-1,354
1,928
1,028
3,081
0
871
-793
-567
-518
5,845
2,063
7,908
FY16
9,284
933
-599
-1,982
101
7,737
-478
7,258
-2,535
4,724
325
2,023
0
-6,714
-713
-1,845
-9,273
8
1,262
7,809
FY17
9,646
1,012
-592
-2,640
-2,626
4,801
-90
4,711
-6,344
-1,633
0
-2,859
0
121
-636
-863
-1,379
473
1,193
3,993
FY18
9,260
1,430
-234
-2,032
-5,732
2,692
-32
2,660
-6,770
-4,110
868
-2,751
1
3,574
-553
-2,176
1,944
1,853
1,589
5,768
FY19
9,547
1,932
134
-2,511
-1,403
7,698
98
7,797
-5,269
2,527
1,235
-1,812
0
-1,057
-546
-2,186
-3,140
2,844
1,446
6,616
FY20
13,004
2,348
-392
-1,105
-6,966
6,889
0
6,889
-4,824
2,066
622
-3,159
0
7,602
-651
-2,538
2,577
6,307
2,289
10,922
FY21E
14,397
2,288
520
-1,800
-2,838
12,567
0
12,567
-3,500
9,067
0
-2,823
0
0
-1,197
-2,780
-6,556
3,188
10,922
16,437
INR m
FY22E
17,797
2,516
402
-2,492
-5,805
12,418
0
12,418
-4,000
8,418
0
-3,238
0
0
-1,164
-3,382
-4,829
4,351
14,110
20,788
6 June 2020
8
 Motilal Oswal Financial Services
Alkem Laboraties
Explanation of Investment Rating
Investment Rating
Expected return (over 12-month)
BUY
>=15%
SELL
< - 10%
NEUTRAL
< - 10 % to 15%
UNDER REVIEW
Rating may undergo a change
NOT RATED
We have forward looking estimates for the stock but we refrain from assigning recommendation
*In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within
following 30 days take appropriate measures to make the recommendation consistent with the investment rating legend.
Disclosures
The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
Motilal Oswal Financial Services Ltd. (MOFSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOFSL, the Research Entity (RE) as defined in the
Regulations, is engaged in the business of providing Stock broking services, Investment Advisory Services, Depository participant services & distribution of various financial
products. MOFSL is a subsidiary company of Passionate Investment Management Pvt. Ltd.. (PIMPL). MOFSL is a listed public company, the details in respect of which are
available on www.motilaloswal.com. MOFSL (erstwhile Motilal Oswal Securities Limited - MOSL) is registered with the Securities & Exchange Board of India (SEBI) and is a
registered Trading Member with National Stock Exchange of India Ltd. (NSE) and Bombay Stock Exchange Limited (BSE), Multi Commodity Exchange of India Limited (MCX) and
National Commodity & Derivatives Exchange Limited (NCDEX) for its stock broking activities & is Depository participant with Central Depository Services Limited (CDSL) National
Securities Depository Limited (NSDL),NERL, COMRIS and CCRL and is member of Association of Mutual Funds of India (AMFI) for distribution of financial products and Insurance
Regulatory & Development Authority of India (IRDA) as Corporate Agent for insurance products.
Details of associate entities of Motilal Oswal Financial Services Limited are
available on the website at
http://onlinereports.motilaloswal.com/Dormant/documents/List%20of%20Associate%20companies.pdf
MOFSL and its associate company(ies), their directors and Research Analyst and their relatives may; (a) from time to time, have a long or short position in, act as principal in, and
buy or sell the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other
compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have
any other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the
specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even
though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report
MOFSL and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, the recipients of this report
should be aware that MOFSL may have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research Analysts is not based on any specific
merchant banking, investment banking or brokerage service transactions. Details of pending Enquiry Proceedings of Motilal Oswal Financial Services Limited are available on the
website at
https://galaxy.motilaloswal.com/ResearchAnalyst/PublishViewLitigation.aspx
A graph of daily closing prices of securities is available at
www.nseindia.com, www.bseindia.com.
Research Analyst views on Subject Company may vary based on Fundamental
research and Technical Research. Proprietary trading desk of MOFSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated
from MOFSL research activity and therefore it can have an independent view with regards to Subject Company for which Research Team have expressed their views.
Regional Disclosures (outside India)
This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability
or use would be contrary to law, regulation or which would subject MOFSL & its group companies to registration or licensing requirements within such jurisdictions.
For Hong Kong:
This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong
Kong Securities and Futures Commission (SFC) pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst
Regulations) 2014 Motilal Oswal Securities (SEBI Reg No. INH000000412) has an agreement with Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of
research report in Hong Kong. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity
to which this document relates is only available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these
securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from registration. The Indian Analyst(s) who compile this report is/are not
located in Hong Kong & are not conducting Research Analysis in Hong Kong.
For U.S.
Motilal Oswal Financial Services Limited (MOFSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under
applicable state laws in the United States. In addition MOFSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers
Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any
brokerage and investment services provided by MOFSL , including the products and services described herein are not available to or intended for U.S. persons. This report is
intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as
"major institutional investors"). This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which
this document relates is only available to major institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration
provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange
Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOFSL has entered into a chaperoning agreement with a U.S. registered broker-
dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this
chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S.
registered broker-dealer, MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public
appearances and trading securities held by a research analyst account.
For Singapore
In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co.Reg. NO. 201129401Z) which is a holder of a capital markets
services license and an exempt financial adviser in Singapore.As per the approved agreement under Paragraph 9 of Third Schedule of Securities and Futures Act (CAP 289) and
Paragraph 11 of First Schedule of Financial Advisors Act (CAP 110) provided to MOCMSPL by Monetary Authority of Singapore. Persons in Singapore should contact MOCMSPL
in respect of any matter arising from, or in connection with this report/publication/communication. This report is distributed solely to persons who qualify as “Institutional Investors”,
of which some of whom may consist of "accredited" institutional investors as defined in section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore (“the
SFA”). Accordingly, if a Singapore person is not or ceases to be such an institutional investor, such Singapore Person must immediately discontinue any use of this Report and
inform MOCMSPL.
Specific Disclosures
1 MOFSL, Research Analyst and/or his relatives does not have financial interest in the subject company, as they do not have equity holdings in the subject company.
2 MOFSL, Research Analyst and/or his relatives do not have actual/beneficial ownership of 1% or more securities in the subject company
3 MOFSL, Research Analyst and/or his relatives have not received compensation/other benefits from the subject company in the past 12 months
4 MOFSL, Research Analyst and/or his relatives do not have material conflict of interest in the subject company at the time of publication of research report
5 Research Analyst has not served as director/officer/employee in the subject company
6 MOFSL has not acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
7 MOFSL has not received compensation for investment banking/ merchant banking/brokerage services from the subject company in the past 12 months
8 MOFSL has not received compensation for other than investment banking/merchant banking/brokerage services from the subject company in the past 12 months
6 June 2020
9
 Motilal Oswal Financial Services
Alkem Laboraties
9 MOFSL has not received any compensation or other benefits from third party in connection with the research report
10 MOFSL has not engaged in market making activity for the subject company
********************************************************************************************************************************
The associates of MOFSL may have:
-
financial interest in the subject company
-
actual/beneficial ownership of 1% or more securities in the subject company
-
received compensation/other benefits from the subject company in the past 12 months
-
other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on
the specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL
even though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report.
-
acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
-
be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the
company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies)
-
received compensation from the subject company in the past 12 months for investment banking / merchant banking / brokerage services or from other than said services.
The associates of MOFSL has not received any compensation or other benefits from third party in connection with the research report
Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only. While calculating beneficial holdings, It does not
consider demat accounts which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL also earns DP income from
clients which are not considered in above disclosures.
Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the
research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.
Terms & Conditions:
This report has been prepared by MOFSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and
may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent
of MOFSL. The report is based on the facts, figures and information that are considered true, correct, reliable and accurate. The intent of this report is not recommendatory in
nature. The information is obtained from publicly available media or other sources believed to be reliable. Such information has not been independently verified and no guaranty,
representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. The
report is prepared solely for informational purpose and does not constitute an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial
instruments for the clients. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. MOFSL will not treat recipients as
customers by virtue of their receiving this report.
Disclaimer:
The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or
distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent. This report and information herein is solely for
informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing
in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances.
The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment
objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. Each recipient of this
document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this
document (including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. The investment discussed or views
expressed may not be suitable for all investors. Certain transactions -including those involving futures, options, another derivative products as well as non-investment grade
securities - involve substantial risk and are not suitable for all investors. No representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of
the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and
should not be treated as endorsement of the views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make
modifications and alternations to this statement as may be required from time to time without any prior approval. MOFSL, its associates, their directors and the employees may from
time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to
perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a
separate, distinct and independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of
information that is already available in publicly accessible media or developed through analysis of MOFSL. The views expressed are those of the analyst, and the Company may or
may not subscribe to all the views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on,
directly or indirectly, to any other person or published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or
entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law,
regulation or which would subject MOFSL to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in
all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.
Neither the Firm, not its directors, employees, agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost
revenue or lost profits that may arise from or in connection with the use of the information.
The person accessing this information specifically agrees to exempt MOFSL or any of its
affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOFSL or any of its affiliates or employees responsible for any such
misuse and further agrees to hold MOFSL or any of its affiliates or employees free and harmless from all losses, costs, damages,
expenses that may be suffered by the person
accessing this information due to any errors and delays.
Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022 71934200/ 022-71934263;
Website www.motilaloswal.com.CIN no.: L67190MH2005PLC153397.Correspondence Office Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road,
Malad(West), Mumbai- 400 064. Tel No: 022 7188 1000.
Registration Nos.: Motilal Oswal Financial Services Limited (MOFSL)*: INZ000158836(BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst:
INH000000412. AMFI: ARN - 146822; Investment Adviser: INA000007100; Insurance Corporate Agent: CA0579;PMS:INP000006712. Motilal Oswal Asset Management Company
Ltd. (MOAMC): PMS (Registration No.: INP000000670); PMS and Mutual Funds are offered through MOAMC which is group company of MOFSL. Motilal Oswal Wealth
Management Ltd. (MOWML): PMS (Registration No.: INP000004409) is offered through MOWML, which is a group company of MOFSL. Motilal Oswal Financial Services Limited is
a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs,Insurance Products and IPOs.Real Estate is offered through Motilal Oswal Real Estate Investment Advisors II Pvt.
Ltd. which is a group company of MOFSL. Private Equity is offered through Motilal Oswal Private Equity Investment Advisors Pvt. Ltd which is a group company of MOFSL.
Research & Advisory services is backed by proper research. Please read the Risk Disclosure Document prescribed by the Stock Exchanges carefully before investing. There is no
assurance or guarantee of the returns. Investment in securities market is subject to market risk, read all the related documents carefully before investing. Details of Compliance
Officer: Name: Neeraj Agarwal, Email ID: na@motilaloswal.com, Contact No.:022-71881085.
* MOSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National
Company Law Tribunal, Mumbai Bench.
6 June 2020
10