MOSL: ALKEM LABORATORIES (Buy)-Weak 4Q-margin improvement is key
Alkem LaboratorieS: Weak 4Q; margin improvement is key
(ALKEM IN, Mkt Cap USD4.1b, CMP INR1978, TP INR2400, 21% Upside, Buy)
- Revenue grew 21% YoY to INR15.1b (est. of INR14.5b) in 4QFY18. EBITDA came in at INR1.4b, with the adj. EBITDA margin at ~9.4%. Other expenses included one-time cost of INR282.5m related to net loss on fair valuation of current investments. Weak margin during the quarter is due to higher contribution from the international business, the GST impact, and high API costs. R&D expense stood at INR1.1b (7.4% of sales v/s normalized rate of ~5%). Adj. PAT stood at INR953m (est. of INR1.8b). For FY18, sales, EBIDAT and adj. PAT stood at INR64.3b (+9.9), INR10.3b (+3%) and INR7b (-21%), respectively.
- Strong domestic business growth; expect better growth in 2HFY19: Alkem’s domestic business grew 12% YoY to INR12.6b. Adjusted for GST, revenue growth in the domestic market was ~17% YoY in 4QFY18. The company is expanding its presence in the domestic business via new product launches and expanding into new therapies. US sales came in at ~USD62m (+14% QoQ). Sequential increase in US sales is on account of key launches, including Nexium and Prasugrel.
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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