Alkem Laboratories share price rallies over 11% in two days after Q2 results beat estimates; brokerages raise target
- Alkem Laboratories delivered a strong beat on Q2FY24 earnings. An improved performance in the US generics and moderating raw material costs led the sharp improvement in operating margins for the quarter, said brokerage firm Motilal Oswal Financial Services.
Alkem Laboratories share price rallied over 6% to hit a 52-week high on Wednesday after the company’s better than estimated September quarter results prompted some brokerages to raise target price on the stock. Alkem Laboratories shares rallied as much as 6.08% to a fresh record high of ₹4,272.00 apiece on the BSE.
Alkem Laboratories stock had ended more than 5% higher in the previous session on November 7 after the company announced its Q2FY24 earnings.
The pharmaceutical company reported a net profit of ₹620.5 crore in the second quarter of FY24, registering a growth of 87.5% from ₹331 crore in the corresponding quarter of last fiscal.
The company’s revenue from operations in Q2FY24 increased 11.7% to ₹3,440 crore from ₹3,079.4 crore, year-on-year (YoY). India sales grew 5% YoY to ₹2,327.8 crore, while international sales grew 27.1% YoY to ₹1,054.2 crore.
Operating performance during the quarter improved sharply as earnings before interest, tax, depreciation and amortization (EBITDA) jumped 64.5% to ₹746.6 crore from ₹454 crore, while EBITDA margin rose by 700 basis points (bps) to 21.7% from 14.7%, YoY.
Nuvama Institutional Equities
Nuvama Institutional Equities said its positive stance on Alkem is underpinned by its strong domestic franchise, chronic expansion, export turnaround and cost savings. With softening input prices, easing US price pressure and management putting weight behind India productivity, the brokerage sees no risk to sustained margin improvement.
It increased FY24 EPS estimates by 7% to factor in the beat and lower tax, while keeping FY25 estimates unchanged.
The brokerage has a ‘Buy’ rating on the stock and raised the target price to ₹4,980 per share from ₹4,850 earlier.
(Exciting news! Mint is now on WhatsApp Channels 
Antique Stock Broking
Alkem Laboratories reported revenue growth of 12% on YoY basis, in line with Antique Stock Broking’s estimate. The brokerage said Alkem reported significant improvement in EBITDA margins, however, the margins are unsustainable as the company expects reduction in gross margins, increase in R&D and other expenses in 2HFY24.
“With India business expected to grow at 11% CAGR over a two year period, we expect margins to see gradual improvement towards 19% by FY26. We also expect the US generics revenue to see near double digit growth in FY26 on a muted FY25. We believe the current stock price has largely priced in its current and forthcoming improvement in margins. We see limited upside on the stock,” it said.
The brokerage maintained its ‘Hold’ rating on the stock and raised the target price to ₹3,962 per share from ₹3,496 earlier, valuing the company at P/E multiple of 22x on 1HFY26 EPS.
Motilal Oswal Financial Services
Alkem Laboratories delivered a strong beat on Q2FY24 earnings. An improved performance in the US generics and moderating raw material costs led the sharp improvement in operating margins for the quarter, said brokerage firm Motilal Oswal Financial Services.
The brokerage raised its earnings estimates by 21% and 11% for FY24 and FY25 factoring in increased share of relatively high-margin products in the US generics segment, benefits from reduced raw material costs, and reduction in effective tax rate.
It expects 28% earnings CAGR over FY23-25 on the back of 11%/10% sales CAGR in the US generics/DF segments and 350 bps margin expansion.
“Even the P/E multiple assigned is largely in-line with its five-year average. Considering these factors, we believe the current valuation adequately factors in the earnings upside,” Motilal Oswal said.
The brokerage reiterated its ‘Neutral’ stance on the stock and raised the target price to ₹3,920 per share.
Meanwhile, Alkem Laboratories share price has seen a decent rally. The stock has risen 14% in one week and more than 20% in one month. Alkem Laboratories shares have gained over 41% year-to-date (YTD).
At 10:45 am, Alkem Laboratories shares were trading 6.06% higher at ₹4,271.10 apiece on the BSE.
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.
Catch all the Business News , Market News , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
- Top Gainers
- Top Losers
- 52 Week High