Buy Alembic Pharmaceuticals; target of Rs 1286 KR Choksey

KR Choksey's research report on Alembic Pharmaceuticals

For the quarter, Alembic Pharma reported strong Revenue growth of 17.4% YoY (up 8.6% QoQ) led by strong growth in the ROW market and the API segment. EBITDA grew 28.3% YoY (up 8.9% QoQ). EBITDA margin expanded to 30.4% in Q2FY21 (from 27.8% last year). Net Profit rose 35.4% YoY (up 10.6% QoQ) while Net Profit Margin for the quarter expanded 303 bps YoY to 22.9% (up 40 bps QoQ) from 19.8% in Q2FY20. The company invested INR 1.68 bn in capex in Q2FY21 (vs INR 1.97 bn in Q2FY20). R&D expense for the quarter stood at INR 1.85 bn (12.7% of revenue) vs INR 1.74 bn (14% of revenue in Q2FY20).

Outlook

Shares of Alembic Pharma are currently trading at a P/E of 17.5x/17.6x on FY21E/22E earnings. We continue to apply P/E multiple to 23.5x on FY22E EPS of INR 54.7/share & raise our target price to INR 1,286/share; an upside potential of 34.0%. Accordingly, we reiterate a “BUY” rating on the shares of Alembic Pharma.