Alkem Labs shares drop 4% after Q4 EBITDA margin contracts to 12.4%: Should you buy, sell or hold?

Alkem Labs shares drop 4% after Q4 EBITDA margin contracts to 12.4%: Should you buy, sell or hold?

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Alkem Laboratories on May 29 reported a net profit of nearly Rs 306 crore for the fourth quarter of the financial year 2025. This marks a 4.2 percent rise from the Rs 294 crore net profit reported in the corresponding quarter of the previous financial year. The shares of the company tumbled nearly 4 percent on May 30 to trade at Rs 5,099 apiece.

The Mumbai-based pharmaceutical company's total revenue from operations rose 7.1 percent year-on-year to Rs 3,143.8 crore for the quarter under review. However, its EBITDA margin contracted to 12.4 percent in Q4 FY25 from 13.7% in Q4 FY24.

Along with the Q4 results, Alkem Labs also announced a final dividend of Rs 8 per equity share for the financial year 2025, subject to shareholders' approval. It has set August 8 as the record date to determine the eligibility of the shareholders set to receive the payment.

The pharmaceutical company saw its India sales grow 8.1 percent to Rs 2,135.5 crore in the fourth quarter, while international sales rose 7.2 percent to Rs 974.7 crore.

Speaking about the company's performance, Alkem Labs CEO Vikas Gupta said, "We ended the year on a good note, with healthy growth in our India business during Q4 and improved profitability and margins for the full year. Our domestic business continues to gain momentum, reinforcing our confidence in its long-term growth trajectory. This performance is driven by strong execution and targeted initiatives across our domestic operations."

He added, "In the international businesses, excluding the Americas, we are seeing good traction, with several key markets making significant contributions to our growth. As we moved forward, we remain focused on strategic growth opportunities and operational excellence to drive sustainable returns."

Jefferies on Alkem Labs:

Jefferies kept an 'underperform' call for Alkem Labs, with a target price of Rs 4,460 per share. This implies a downside potential of over 16 percent from the stock's previous closing price of Rs 5,325 apiece.

The international brokerage noted that the pharma company's Q4 margin missed estimate. However, it noted that the company is now pivoting towards accelerating growth after 18 months of margin improvement.

Jefferies also noted that Alkem Labs has guided for high-single digit growth in overall revenue for FY26, and double digit growth for FY27.  The brokerage however has cut the firm's FY26/27 EPS estimates by 3-6 percent.

Nomura on Alkem Labs:

Nomura meanwhile kept a 'Buy' call on Alkem Labs with a target price of Rs 5,430 per share. This implies an upside potential of nearly 2 percent from the stock’s previous closing price.

Nomura said that the company's Q4 sales were in-line with its estimates, although EBITDA and profit after tax (PAT) were 2 percent and 6 percent lower respectively than the estimates. Further, the company expects effective tax rate to rise to 35-37 percent in FY27, as against the brokerage’s current estimate of 20 percent.

Alkem Labs shares have gained over 4 percent in the past one month, but the stock is down over 4 percent in 2025 so far.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.