Neutral Alkem Laboratories; target of Rs 3920: Motilal Oswal

Motilal Oswal recommended Neutral rating on Alkem Laboratories with a target price of Rs 3920 in its research report date November 07, 2023.

Broker Research

November 10, 2023 / 14:10 IST

Neutral

26 Aug, 2025 12:21

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Motilal Oswal's research report on Alkem Laboratories

Alkem Laboratories (ALKEM) delivered a strong beat on 2QFY24 earnings. An improved performance in the US generics and moderating raw material costs led the sharp improvement in operating margins for the quarter. Given the surplus cash, ALKEM is looking for inorganic opportunities in chronic therapies and the consumer healthcare space. We raise our earnings estimates by 21%/11% for FY24/FY25 factoring in: 1) increased share of relatively high-margin products in the US generics segment, 2) benefits from reduced raw material costs, and 3) reduction in effective tax rate.

Outlook

We value ALKEM at 22x 12M forward earnings to arrive at our TP of INR3,920. We expect 28% earnings CAGR over FY23-25 on the back of 11%/10% sales CAGR in the US generics/DF segments and 350bp margin expansion. Even the P/E multiple assigned is largely in-line with its five-year average. Considering these factors, we believe the current valuation adequately factors in the earnings upside. Reiterate Neutral.

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