Alkem Lab stock may give 20% returns in next one year

Just like the Ramayana, Alkem Laboratories Ltd is also a story of two brothers, Shri Samprada Singh and Shri Basudeo Singh who stood by each other and chased their dreams with dedication and hard work to create one of the largest pharmaceutical companies in the country to carve a distinct place for itself in the global pantheon of pharma giants. Fondly, the two brothers are addressed as the Ram-Laxman of Indian pharma. The single idea to create Alkem was born in 1973 which has triggered and transformed to become one of India’s largest generic and specialty pharma company. At Alkem Lab, enriching lives is not only a prime priority, but the only priority. Making a difference to a patients’ life is an unwavering commitment. Alkem works towards the production of apex quality generic products, branded generics, speciality products, active pharma ingredients and nutraceuticals which are marketed in India as well as globally. Alkem has made US the focal point of international operation in the global footprint by cumulatively filing more than 125 ANDAs with the US FDA. Other major international markets for the company include Australia, Chile, Philippines and Kazakhstan. The company has an extensive manufacturing footprint with 19 facilities at Daman, Baddi, Sikkim and Indore in India and two in the US. The company has a portfolio of 800 brands in India and is ranked the 5th largest pharma company in India in terms of domestic sales. The Q3FY23 has been a strong quarter for Alkem with a y-o-y revenue growth of about 16%, EBITDA margin at 19.7% and PAT at about Rs 450 crore. During the quarter, Alkem generated cash in excess of Rs 500 crore bringing a strong net cash position of Rs 1,900 crore as of December 2022. The company has built a scorching pace of growth with it outperforming the Indian pharma market by a whopping 670 basis points, as per secondary sales data by IQVIA. Apart from gaining market share across all acute therapies areas of vitamin, minerals, nutrients, pain management and anti-infective. In the chronic therapy area like anti-diabetic, neuro, CNS, urology, Alkem has gained a substantial market share. After two quarters of subdued performance internationally, the US business posted a strong growth in Q3 FY23 on the back of good season posting a y-o-y growth of 33% and sequential growth of 26% in rupee terms. The company expects to deliver a market beating performance in the coming quarters as well in the domestic franchise plus continue to maintain its leadership position. Alkem has also been doing a lot of cost optimisation projects which are underway and the benefits are going to start in the coming quarters. The Alkem Lab stock currently quoting at Rs 3100 on the bourses is a good fundamental buy for a 20% price appreciation in the next one-year time frame.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.