Motilal Oswal's research report on Alembic Pharma
Alembic Pharma (ALPM) delivered a better-than-expected performance in 3QFY23, driven by improved sales growth in the domestic formulation (DF)/API segment and controlled employee/R&D expenses. We raise FY23 earnings estimates by 4% to factor in higher API sales and off-take of flu-related products. While R&D spending is expected to drop YoY in FY24, it would be offset to some extent by opex related to new manufacturing facilities. Hence, we maintain estimates for FY24/FY25. We value ALPM at 17x 12M forward earnings to arrive at a TP of INR580.
The stock has corrected 22% since we downgraded it to SELL in Aug’22 and now trades at 17.5x FY24E EPS of INR31 and 15x FY25E EPS of INR36. With ANDA launches likely to pick up pace over the medium term as facilities become compliant, we expect earnings to revive over FY23-25. While the outlook is expected to improve, we upgrade ALPM to Neutral as we wait for a better entry price.
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