Buy ALKEM Laboraties; target of Rs 3665: Motilal Oswal

Motilal Oswal 's research report on ALKEM Laboraties

ALKEM exhibited strong traction in US generics and significant savings on opex in 1QFY21, which more than offset the YoY decline in domestic formulation (DF) sales, resulting in record high quarterly earnings. The pandemic has showcased strong brand recall for ALKEM's products in the DF segment and superior execution in US generics. We have raised our EPS estimates by 30%/15% for FY21/FY22E to factor in cost rationalization initiatives and improving profitability in the US generics segment. We value ALKEM at 23x (10% discount to its 3-year average) to arrive at price target of INR3,665 on 12M forward earnings basis. We remain positive on the outperformance of Chronic therapy in DF, trade generics segment and healthy ANDA pipeline for the US market. Re-iterate Buy.

Outlook

Accordingly, we have revised our price target to INR3,665 on 23x 12-month forward earnings. Re-iterate Buy.

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