Hold Alembic Pharma; target of Rs 460: ICICI Direct

ICICI Direct's research report on Alembic Pharma

Revenues grew 15% YoY to Rs 853 crore (I-direct estimate: Rs 830 crore) mainly on account of 45% YoY growth in the US to Rs 290 crore (I-direct estimate: ~Rs 233 crore) led by one-off and volume driven growth. Excluding one-off, US sales grew 30% YoY EBITDA margins improved 215 bps YoY to 20.3% (I-direct estimate: 22.5%) mainly due to lower other expenditure. EBITDA increased 29% YoY to Rs 173 crore vis-à-vis I-direct estimate of Rs 187 crore Net profit increased a mere 1% YoY to Rs 94 crore (I-direct estimate of Rs 130 crore). Growth in the operational performance was largely offset by higher depreciation & tax rate (27.3% vs. 14.7% in Q4FY17).

Outlook

We believe this is fraught with a new set of challenges. The benefits are most likely to be back-loaded. Immediate cash burn is likely to weigh on sentiments in the near term. Accordingly, we arrive at our new target price of Rs 460 based on 18x FY20E EPS of Rs 25.5.