Buy Alkem Laboratories; target of Rs 6400: ICICI Securities

ICICI Securities research report on Alkem Laboratories

Alkem Laboratories’ CEO, Dr. Vikas Gupta, is targeting double-digit revenue growth in the medium term, driven by strong hold in India (68% of sales), other international markets and new ventures. In India, it aims to grow 100-150bps faster than IPM as focused chronic therapies are growing at a faster pace with adequate growth supported by the acute portfolio. It acquired Bombay Ortho for INR 1.5bn in Apr’25 and entered into an in-licensing deal with Exactech for a foray in the fast-growing medtech space. Commercial operations at the new CDMO facility in the US will start in Q3FY26 and Alkem has a decent orderbook which could ensure swift pick-up and EBITDA breakeven in 12-18 months. We believe optimisation of RM cost and operating leverage may drive 100bps expansion in margins every year (25% margin targeted in medium term) while losses of new ventures may be curbed from H2FY27, helping it post ~200bps improvement in margins over FY25-28E.

Outlook

Transitory impact of opex of new ventures (annual opex of INR 2.4-3bn) and higher tax rate (35% from FY27) are already priced in, making the valuations attractive. Retain BUY with a revised TP of INR 6,400 (23x FY27E EV/EBITDA).

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