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MOSL: Morning India (27/March/19)-1. Alkem Laboratories (FY19 an aberration, but outlook remains promising); 2. Annual India Ideation Conference 2019 (‘Management Says’)

MOrning India (27/March/19): 1. Alkem Laboratories (FY19 an aberration, but outlook remains promising); 2. Annual India Ideation Conference 2019 (‘Management Says’)

 

Today’s top research idea

Alkem Laboratories: FY19 an aberration, but outlook remains promising; New launches in the US, superior execution in India to aid earnings growth

• Alkem's 9MFY19 performance was subdued due to a course correction and weak season in the domestic formulations (DF). But, we remain positive on ALKEM due to its superior execution in DF and US generics, thereby driving 23% earnings CAGR over FY19-21E.
• The price correction of the past six months provides a good buying opportunity in Alkem. Also, the company has compliance and healthy ANDA pipeline in place; improved profitability is expected from its US generics business. Its DF business should also fare well due to increased focus on chronic therapies and a robust trade generics business.
• We have reduced ALKEM's P/E multiple from 24x to 22x to factor in US generics' headwinds and the gradual growth downtrend in the DF industry to arrive at TP of INR2,170. Re-iterate BUY.

Piping hot news

Buyback hopes cheer up investors of ailing PSUs

• The government is planning to buy back shares of loss-making public sector companies and delist them, a move that may come as a relief to several retail investors who have been stuck with such investments.