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Anand Rathi has a buy call on Alkem Laboratories with a target price of Rs 2,307.
The current market price of Alkem Laboratories is Rs 2,091.95.
Time period given by the brokerage is one year when Alkem Laboratories price can reach the defined target.
View of the brokerage on the company:We are sanguine about Alkem’s prospects, considering its capability for healthy revenue and profit generation, driven by a focus on brand leadership in the acute segment, the rising contribution from its chronic division and a ramp-up in its US business.
We expect revenue and earnings CAGRs over FY18-20 of respectively 16 per cent and 38 per cent.
We retain our Buy rating, with a revised price target of Rs 2,307.
Domestic formulations: In its domestic business (about 72 per cent revenue share) Alkem is expanding operations through product launches and moving into new therapy areas.
Also, it has strengthened its field force, adding about 2,000 MRs in the last two years, to its present field-force strength of about 8,000.
It would look to build upon its growing presence in the chronic therapy segments of neuro/CNS, dermatology, cardiology and anti-diabetics, simultaneously maintaining its leading position in the acute therapy segments of anti-infectives, gastro-intestinals, pain analgesics and vitamins.
We expect a 14 per cent revenue CAGR over FY18-20 in its domestic formulations, backed by volume growth, the rising chronic share, its strong marketing network and product launches.
Launches to drive US formulations: The US (about 21 per cent revenue share) is the second-largest market for Alkem.
Here, it is looking to gear up its pace of ANDA filings through its strong focus on RD, capitalising on in-licensing opportunities and strategic alliances and partnerships to enhance its capabilities and product range.
So far, it has filed 107 ANDAs (47 Para IV), of which 49 have been approved (incl.
six tentatively, one NDA).
Its US formulations would clock a 17 per cent revenue CAGR over FY18-20, considering 8-10 launches.
Valuation: We maintain a Buy on the stock, with a revised target of Rs 2,307 based on 22x FY20e EPS.
Risks: Delay in US FDA approvals, currency fluctuations, more products under price control in India.
