Nuvama Institutional Equities cut the target price on Alkem Laboratories by 3.5% to Rs 5,840 from Rs 6,053 as the brokerage house sees a slowdown in acute business. It retained its ‘Hold’ call on the stock. It also slashed the earnings per share estimates by 3% for FY26 and 2% for FY27. It further cut the return on equity estimate to 17% in FY27.
The brokerage firm said that the company’s domestic business declined sequentially, which reflects a slowdown in the acute business. Adding, the impact of no price hike in the NLEM portfolio, which makes up 30% of domestic revenue.
Alkem Laboratories’ domestic business in the third quarter of the current fiscal year dropped 4% sequentially to Rs 2,400 crore. However, it grew 6% year-on-year. The domestic business missed Nuvama’s estimates.
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Not just domestic business, but international business also faced some heat. The US exports contracted 7% YoY while the international exports contracted 14% YoY. However, the brokerage firm thinks that it may return to normal levels with growth in the domestic acute and US generics.
“We note Alkem’s gross margin in 9MFY25 is attractive; however, this may not sustain in FY26E with growth in domestic acute and US generics business. We think cost optimisation is necessary to expand EBITDA margin,” said Nuvama in a research note.
Further, it said that acquisitions have a small quantum as the company recently acquired Bombay Ortho and Adroit Biomed, which made a combined revenue of Rs 60 crore for FY24, 0.5% of consolidated revenue. “We note, that under new management, Alkem is making some hard decisions (divestment/M&A), even though the quantum is very small for now,” Nuvama said.
Alkem Laboratories in Q3
The company’s consolidated net profit rose 6% YoY to Rs 641 crore from Rs 604 crore in Q3 FY24. Sequentially, profit fell almost 9% from 702 crore in the previous quarter of the same financial year. Its total income for the quarter stood at Rs 3,467 crore,
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