7 June 2021
Update
|
Healthcare
Alkem
Buy
BSE SENSEX
52,329
S&P CNX
15,752
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On growth path despite high base of past year
CMP: INR 3,139
TP: INR3,730 (+19% )
Stock Info
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
ALKEM IN
120
375.3 / 5.2
3215 / 2285
2/-8/-22
542
39.8
ALKEM is well-placed to benefit from a medium term recovery in the Domestic
Formulation (DF) business.
It had a positive impact of higher offtake of COVID-19 associated drugs in the
recent past. The reduction in COVID-19 cases, coinciding with seasonal change,
bodes well for a pick-up in the performance of Acute therapies.
Bunched-up ANDA launches over the next 12-15 months are expected to
improve sales growth as well as profitability of the US business.
We have tweaked our FY22E/FY23E EPS estimate by 2%/3% and continue to
value ALKEM at 23x 12-months forward earnings to arrive at our TP of INR3,730.
We remain positive on the back of robust growth in the DF segment and
improving profitability in the US segment. Reiterate Buy.
Gastro/VMNs outshines; Acute therapies in revival mode
Financials Snapshot (INR b)
Y/E MARCH
2021 2022E 2023E
Sales
88.5 99.2 110.8
EBITDA
20.1 21.1 24.7
Adj. PAT
16.0 16.8 19.2
EBIT Margin (%)
19.6 18.5 19.6
Cons. Adj. EPS (INR) 134.1 140.1 160.7
EPS Gr. (%)
40.5
4.5 14.7
BV/Sh. (INR)
617.0 724.0 848.5
Ratios
Net D:E
0.0 -0.1 -0.2
RoE (%)
23.7 20.9 20.4
RoCE (%)
19.9 17.9 18.0
Payout (%)
24.9 23.7 22.5
Valuations
P/E (x)
23.5 22.5 19.6
EV/EBITDA (x)
18.6 17.4 14.5
Div. Yield (%)
0.9
0.9
1.0
FCF Yield (%)
2.9
2.5
3.2
EV/Sales (x)
4.2
3.7
3.2
Shareholding pattern (%)
As On
Mar-21 Dec-20 Mar-20
Promoter
60.2
62.4
65.9
DII
13.2
13.0
11.8
FII
4.4
4.1
3.6
Others
22.2
20.5
18.7
FII Includes depository receipts
ALKEM witnessed strong demand for Vitamin/Minerals/Nutrients (VMNs)
and Gastrointestinal drugs due to increased prescriptions associated with
COVID-19. ALKEM posted strong growth (82% YoY) in May’21 (v/s 60% for
IPM; as per AIOCD data) for VMN therapy. Its Gastrointestinal therapy saw
49% YoY growth in May’21. Anti-Infectives and Pain therapies recovered,
growing over 75% each in these therapies in May’21.
COVID-19 cases are on a downtrend with lockdowns and increased
vaccination rate. The daily new case run-rate is down to 0.13m from a peak
of 0.41m on 6
th
May’21. We expect reduced COVID-19 cases to lead to a
partial reduction in the intensity of lockdown measures across states. The
gradual opening of the economy is also supported with seasonal change,
which would drive higher offtake of Acute therapies like Anti-Infectives. In
fact, the intensity of decline in the Anti-Infective segment has been on a
downtrend over the past eight months.
ALKEM is the second largest trade generics player in India. The business
contributed 20-25% of sales, with robust (over 20% YoY) growth in FY21
led by higher influence by chemists and commensurate availability of trade
generic brands. Momentum is expected to continue over the medium
term, with increasing influence of chemists, particularly in Tier II/III cities.
We expect 15% sales CAGR in DF to INR75.4b (67% of sales) over FY21-23E.
Faster filings/approvals - key to growth in US sales
The US business is expected to grow faster in FY22E, led by higher number
of launches YoY. ALKEM currently has 110 approved ANDAs, half of which
are yet to be commercialized.
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.
Tushar Manudhane
(Tushar.Manudhane@motilaloswal.com)
Bharat Hegde, CFA
(Bharat.Hegde@motilaloswal.com)