Despite Alkem Laboratories posting a multifold jump in net profit for the March quarter, international brokerage Jefferies slashed its target price on the player.
The pharma player reported an impressive 313.6 percent year-on-year increase in net profit, reaching Rs 293.56 crore for the quarter ending March, compared to Rs 70.98 crore in the same period last fiscal year.
The surge in profit was largely attributed to a weak base in Q4FY23, due to the derecognition of deferred tax amounting to Rs 120 crore. Adjusted for this tax effect, the net profit showed a more modest increase of around 54 percent.
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Jefferies expressed disappointment in the quarterly earnings, citing a two percent decline in India sales year-on-year. Moreover, Alkem Laboratories' projection of a 10 percent revenue growth for FY25 fell short of the brokerage's estimates.
The brokerage also noted that the EBIDTDA margin expansion of 20-30 basis points was also below estimates, especially since the current fiscal year will be focused on investment, with higher R&D spends and increased capex.
Therefore Jefferies decided to maintain its underperform call and cut its target price on Alkem Laboratories to Rs 4,200, from Rs 4,470 earlier. This indicated a downside of 20 percent.
Alkem Laboratories stock price has jumped 57 percent over the past year as against an increase of 22 percent in the benchmark Nifty 50 index.
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