YES Securities' research report on Alembic Pharma
Alembic Pharma FY20 Annual Report (AR) reveals management confidence on US investments made in the past 3 years as new facilities are monetized starting FY22. While capex plans and solid performance in FY20 are known, we highlight 1) solid R&D productivity (~US$5mn per ANDA, ex-sartans) 2) best in class receivables management, especially when compared to peers with lower US share of revenues and 3) Top quartile return profile (RoE/ROCE) despite a Rs20bn non-revenue generating assets on the balance sheet. Management remains confident in its focused approach on US at a time when other generic players are downsizing their investments. Growth in domestic market would be keenly eyed after the incentive and portfolio clean-up in FY20.
Outlook
We retain Alembic as Top BUY in pharma with a PT of Rs1,100, based on 25x FY22 PE as company brings solid revenue visibility coupled with scope for sartans-led earnings surprise in FY21/22.
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