Hold Alembic Pharma; target of Rs 620: ICICI Direct

Revenues grew 24.8% YoY to Rs 728 crore (I-direct estimate: Rs 647.5 crore) on account of continuous windfall gains from gAbilify sales in the US. Export sales grew 75.2% to Rs 308.5 crore (I-direct estimate: Rs 228.7 crore. Domestic branded formulation sales grew 5.7% to Rs 277.7 crore (I-direct estimate: Rs 275.8 crore) on the back of 16% growth in the speciality portfolio.

Q1 was largely driven by a recovery in gAbilify sales and strong growth in the domestic speciality business. With the announcement of aggressive R&D and capex plans, the management has signalled the strategy for the next five-six years, especially on the US front. This includes a foray into niche areas like oncology, injectables, derma, etc. This, we believe, is fraught with a new set of challenges. The benefits are most likely to be back-loaded. The company is now standing at a new inflexion point as it prepares to do away with one-off finite opportunities in the US. The immediate cash-burn is likely to weigh on sentiments in the near term. We reiterate our target price of Rs 620 based on 22x FY18E EPS of Rs 28.1.