Buy Alembic; target of Rs 96: Karvy Stock Broking

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Buy Alembic; target of Rs 96: Karvy Stock Broking

Karvy Stock Broking is bullish on Alembic and has recommended buy rating on the stock with a target of Rs 96 in its January 28, 2011 research report.

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Karvy Stock Broking is bullish on Alembic and has recommended buy rating on the stock with a target of Rs 96 in its January 28, 2011 research report.

"Alembic's domestic formulations (DF) business continued to witness traction owing to strong performance of its anti-infective category products. Major therapy areas of the company have witnessed continued improvements except for gynaecology during Q3FY11."

"Alembic's Q3FY11 net revenues increased 21.6% y-o-y to Rs 3,652 million higher than our estimates of Rs 3416 million for the quarter. Alembic's EBITDA margins were reported at 15.9% in Q3FY11 higher than our estimate of 11.8% during the quarter. Net profit for Q3FY11 was reported higher at Rs 308.4 million (our estimates Rs 177 million). We upgrade our revenue estimates for FY11 by 5.2% to Rs 13502 million primarily due to higher domestic API sales and for FY12 by 9.8% to Rs 15850 million due to higher API sales. We also upgrade our EBITDA margins from 11.2% in FY11 to 13% and from 12.8% in FY12 to 14.3% due to savings in personal and R&D cost. We maintain our P/S multiple at 1x for Alembic Pharma on account of strong traction in the export space and arrive at a price of Rs 73. Alembic Ltd which is a predominant API play is also valued at 20 % discount compared to its peers at 0.21x sales at Rs 3.5. We continue to value land at Rs 19.3 per share."

"Domestic formulations (DF) sales increased 20% y-o-y to Rs 1842 million marginally lower than our estimates of Rs 1900 million during Q3FY11. Export formulations business reported 96.7% y-o-y to Rs 667.6 million (our estimates Rs 690 million) owing to higher sales in non-regulated markets. Domestic API reported a strong 98.6% y-o-y growth during the quarter."

"Alembic has made a mark on specialised therapies such as Diabetology, Cardiology, Gasteroenterology and Gynaecology. Company continues to invest in newer specialty segments and has also renewed its focus on penetrating rural segment. Domestic API sales reported strong growth (+98.6% y-o-y) primarily due to higher sales of its macrolides products. Sales in the domestic business witnessed higher off take owing to muted growth in export API regulatory business as production was shifted for sales in the domestic market. Export API to regulated markets continued to be impacted due pricing issues leading to non-supply to a key MILLIONC customer. Alembic is currently marketing 7 products in the US market and 3-4 products are expected to be launched in 4QFY11. We upgrade our target price by 6.6% to Rs 96 and continue to rate the stock as BUY," says Karvy Stock Broking research report.

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To read the full report click on the attachment