MOSL: ALKEM LABORATORIES (Neutral)- Weak 4Q-domestic business delivers muted performance
​Alkem Laboratories: Weak 4Q; domestic business delivers muted performance
(ALKEM IN, Mkt Cap USD4.1b, CMP INR1866, TP INR1900, 2% Upside, Neutral)
- Revenues grew 9% YoY to INR12.5b, missing estimate by 10.8%, primarily due to weak domestic business growth of ~7%. US business sales stood at USD44m (v/s USD50m in 3QFY17). EBITDA of INR1.5b declined 4% YoY, with the margin contracting 160bp YoY (-620bp QoQ) to ~11.9%, mainly due to higher R&D spend (7.3% of sales v/s normalized rate of ~4-4.5%), muted growth in domestic business and addition of 400-500 MRs in the acute segment.
- Domestic business – weak growth: Domestic business grew by a muted 7% YoY to INR8.6b due to a decline in the anti-infective market, demonetization impact and destocking in the channel due to GST. Despite the impact of GST in the near term, Alkem expects its domestic business to grow at mid-teens in FY18.
- US – sequential decline due to seasonality: US sales declined 12% QoQ (+20% YoY) to USD44m due to seasonality (Benzonatate sales goes up in winter). We expect ramp-up in US business in coming quarters on the back of four ANDA launches in 4Q and expected high-single-digit launches in FY18.
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.
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