Angel Broking neutral on Alembic Pharmaceuticals

Angel Broking's report on Alembic Pharmaceuticals

Alembic Pharmaceuticals (Alembic)’ 3QFY2015 results came in below our expectations. The sales grew by 4.7% yoy to Rs 507cr V/s an expectation of Rs 575cr. The overall growth during the period was subdued as exports de-grew by 3.6% yoy, while the domestic markets on the other hand, posted a moderate growth of 11.7% yoy. The OPM came in at 20.1% V/s 21.0% in 3QFY2014, a yoy dip of 82bp. This was in-spite of a 178bp yoy expansion in the gross margin, which came in at 65.6%, mainly on back of lower rise in the employee and other expenditure, which rose by 3.9% and 5.9% yoy, respectively. The Adj. net profit came in at Rs 71cr V/s an expected Rs 75cr and V/s Rs 66cr in 3QFY2014, ie a yoy growth of 7.2%.

The sales during the quarter grew by 4.7% yoy to Rs 507cr V/s Rs 484cr in 3QFY2014.The overall growth, during the period was subdued as exports de-grew by 3.6% yoy. The OPM came in at 20.1% V/s 21.0% in 3QFY2014, a yoy dip of 82bp. This was in-spite of a 178bp yoy expansion in gross margins, which came in at 65.6%, mainly on back of lower rise in the employee and other expenditure, which rose by 3.9% and 5.9% yoy respectively. The Adj. net profit came in at Rs 71cr V/s an expected Rs 75cr and V/s Rs 66cr in 3QFY2014, a yoy growth of 7.2%.

Outlook and valuation: "Alembic’s growth and profitability profile has improved post the restructuring carried out by the Management. Over FY2014-16, we expect the company to post a CAGR of 16.8% and 21.2% in sales and net profit, respectively. We recommend a Neutral rating on the stock", says Angel Broking research report.

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