Alkem Laboratories share price declines 9% post Q4 results: Should you Buy, Sell or Hold the stock?

Stock Market Today: Alkem Laboratories share price dipped more than 9% in the opening trades on Thursday post Q4 results that were declared by the company on Wednesday.

Alkem Laboratories share price opened at ₹5,120.00, lower over the previous day's close of ₹5,262.45. Alkem Laboratories share price thereafter slipped further to lows of ₹4,894.60 on the NSE on Thursday.

Weak India sales impact revenue growth

The revenue from operations for Alkem Laboratories, the domestic multinational pharmaceutical manufacturer, at ₹ 2935.8 crore could grow just 1.1% year-on-year growth (down 12% sequentially, disappointing the investors.

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India sales at ₹ 1972.4 crore registered a de-growth of 1.9% year-on-year

International sales though at ₹ 909.6 crore marked year-on-year growth of 6.1%, cushioned the revenue decline.

Alkem Laboratories however had reported three-fold increase in consolidated net profit to ₹293.56 crore ,for the fourth quarter of fiscal year 2024. The same was also helped by derecognition of deferred tax during the same period last fiscal year.

The Earnings before interest Tax depreciation and amortisation (EBITDA) as per the company at ₹402 Crore grew 13.8% year on year

Earnings Miss estimates

Alkem Laboratories 4QFY24 revenues at ₹2935.8 Crore came 8% below our estimates said analysts at Jefferies India Pvt Ltd. The Ebitda at ₹402 Crore ( down 43% sequentially) was 13% below their estimates. The Net profit at 293.56 crore down 51% sequentially was 15% below their estimates. Net profit as per analysts was impacted by impairment loss associated with Indore plant and St Louis, USA plant.

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EBITDA margin in 4Q were at 13.7% compared to 21.3% in Q3 and 12.2% in 4QFY23, which were impacted due to lower sales in the quarter, said analysts

Analysts Cautious

Analysts at Antique Stock Broking in their post results report said that the decline in India business came as a negative surprise to us as it dragged the overall Ebitda margin to ~14%. Besides India, US generics also saw a sequential decline on account of seasonality and sustained price erosion. Analysts at Antique Stock Broking though expect Alkem's revenue to grow at ~9% CAGR over a two-year period and along with prudent expenditure management, they expect the Ebitda margin to improve and sustain at ~20% for FY25 and FY26. However they believe the stock trades at an expensive valuation of 20 times Enterprise Value by Ebitda and 26 times price to earnings based on FY26 estimates with the risk of underperformance of the India business.

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Analysts at Jefferies said that Alkem Laboratories has been struggling for quite some time on growth as well as normalization of its Ebitda margin, and we see no strong reason for either of them to change in near term. They have cut FY25 and FY26 Earnings per share estimates by 5-6%.

Analysts at Motilal Oswal Financial Services have reduced their earnings estimate by 4% and 2% respectively for FY25 and FY26 respectively, factoring in increased operating expenses related to the Enzene facility in the US, and higher product development spend. The MOFSL analysts who have Neutral ratings on the stock say that they expect 10% earnings CAGR (compound annual growth rate) over FY24-26, backed by 12% and 20% sales CAGR in Domestic Formulations Ex-US exports business and stable margins.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions