Alkaloid AD Skopje: A rising money spinner, Skopje-style (HOLD - initiation of coverage)

We initiate on North Macedonia’s Alkaloid AD Skopje (Alkaloid) with a price target (PT) of MKD 13,567 and a HOLD recommendation (upside of c.7%). Alkaloid is a traditional, mid-sized SEE producer of branded prescription generics, OTC drugs and fast-moving consumer goods (FMCG), one that has stayed in step with the times to keep its legacy product portfolio relevant, while consistently expanding into new indications and, selectively, new markets. The broad product slate enables the business to generate solid FCF yields and a solid return on invested capital, and supports an investor-friendly shareholder remuneration policy. This year, management is wrapping up a major investment to expand its solid-form drug capacity by another 50%, which we expect to drive a 9.5% revenues CAGR and c.13% net profit growth through to 2023E. This has been recognised already by local investors – which account for 97% of the shareholder base – so, at the current levels, the upside is priced in already, in our view, and thus our HOLD rating. Given an opportunity for better buying, though, Alkaloid’s mix of growth and yield should catch the eye of regional investors, we believe.