MOSL: ALKEM LABORATORIES (Buy)-DF-led beat on earnings, undertaking efforts to maintain momentum
Alkem Laboratories: DF-led beat on earnings, undertaking efforts to maintain momentum
(ALKEM IN, Mkt Cap USD3.3b, CMP INR1964, TP INR2325, 18% Upside, Buy)
- Highest-ever quarterly revenue run-rate: ALKEM's revenue increased ~18% YoY to INR22.6b (our estimate: INR20.2b) in 2QFY20, led by robust growth in domestic formulation (DF) sales (+18% YoY to INR15.5b, 70% of sales) due to strong traction in major therapies. International business grew ~15% YoY to INR6.7b (30% of sales), mainly led by the RoW business (+30.6% YoY). US business grew at 11.7% YoY to INR5.3b.
- Better operating leverage further drives profitability: Adjusting for one-time RM cost pertaining to R&D, the gross margin was down marginally by ~30bp YoY to 61.1%. However, the EBITDA margin improved ~200bp YoY to 21% (our estimate: 19%), mainly due to controlled cost (other expenses: -250bp YoY). Consequently, EBITDA was up ~31% YoY at INR4.6b (our estimate: INR3.8b). PAT grew at a higher rate of ~55% YoY to INR3.9b (our estimate: INR2.7b) due to a lower tax rate.
- For 1HFY20, revenue/ EBITDA/ PAT grew by 15%/28%/48% YoY to INR41b/INR7.4b/INR5.8b.
Alkem Laboratories Limited is a pharmaceutical company. The Company is engaged in the development, manufacture and sale of pharmaceutical and neutraceutical products. The Company operates through two segments: pharmaceutical and investing. The Company produces generics, generic drugs, active pharmaceutical ingredients (APIs) and neutraceuticals, which it markets in India and approximately 50 countries internationally, primarily the United States. The Company offers various products, such as CLAVAM 375, CLAVAM BID DRY SYRUP, CLAVAM INJ 300MG, FREEAIR NASAL SPRAY, PAN 40MG INJECTION (VIAL), PAN/40MG TABLETS, PROWEL DRY SYRUP (30ML), TAXCLAV 100 DT TABLETS, SATROGYL O DRY SYRUP, XONE/500MG VAIL, MEROSURE KIT 500, MEROSURE 500 MG and ZADONASE, among others. The Company has approximately 16 manufacturing facilities, of which 14 manufacturing facilities are at geographically diversified locations in India and two in the United States.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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