Accumulate Alembic Pharmaceuticals; target of Rs 995: KR Choksey

KR Choksey's research report on Alembic Pharmaceuticals

For the quarter, Alembic Pharma reported 6.1% revenue growth YoY (-2.6% QoQ) led by both YoY/QoQ decline in the US formulations’ and a QoQ fall in India formulations’ revenue. Additionally, a flat growth in API segment’s revenue QoQ, also added to the negative revenue growth performance QoQ. EBITDA grew 4.3% YoY (down 6.4% QoQ). EBITDA margin contracted to 26.7% in Q4FY21 (from 27.1% in Q4FY20 and 27.8% in Q3FY21). Adjusted net profit rose 6.5% YoY (down 14.3% QoQ) while net profit margin for the quarter expanded 97 bps YoY but contracted 268 bps QoQ to 19.6%.

Outlook

We apply a 17.4x P/E multiple on FY23E EPS of INR 57.3/share (earlier 23.5x on FY22E EPS of INR 54.7/share) & reduce our target price to INR 995/share (earlier INR 1,286/share); implying a potential upside of 5.6% over the CMP. Accordingly, we downgrade the rating on the shares of Alembic Pharma to “ACCUMULATE”.