INSUBCONTINENT EXCLUSIVE:
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
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.
