Reduce Alkem Labs; target of Rs 5850: Choice Institutional Equities

reduce

Choice Institutional Equities's report on Alkem Labs

With revenue growth expected to remain in low double digits and margins largely flat in FY26, ALKEM’s overall fundamental trajectory remains unchanged. While high-value launches, such as Semaglutide, Tolvaptan and Valsartan could drive moderate margin expansion, from FY27E, this remains dependent on the pace at which these launches scale up. PAT growth will also be constrained by the expiry of MAT credits and a sharp rise in ETR to 30–35% (vs. 13–15% currently), limiting near-term earnings upside. We expect Revenue/EBITDA/PAT to deliver a CAGR of 12.5%/16.0%/9.2% over FY25–28E. That said, medium-term visibility has improved with (1) the GLP-1 opportunity on approval and (2) the US CDMO facility, which carries revenue potential of INR 3,000 Mn over 12–18 months.

Outlook

To reflect this, we revise our valuation multiple to 25x (from 20x). Applying this to the FY27–28E average EPS yields a revised TP of INR 5,850 (vs. INR 4,750 earlier) and upgrade our rating to REDUCE.

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Alkem Labs - 17112025 - choice