Alembic Pharma share price: Buy Alembic Pharma, target price Rs 1,100 ...

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Please find below mentioned medium term fundamental stock for delivery purpose.

 

Company	CMP	Target	BSE Code	NSE Code
Alembic Pharmaceuticals Ltd.	890	990	533573	APLLTD

 

Alembic Pharmaceuticals Limited (APL) was established in 1907 and has a legacy of over 100 years in pharmaceutical industry. It is one Asia’s most trusted pharmaceutical names. The company has presence in both API (Active Pharmaceutical Ingredients) and formulation. APL derives bulk of business from formulation (~80%) and rest from API. Domestic business forms nearly 35% while international accounts for 65%. Within international, US accounts for major revenue share to the extent of 72% of total international business.
 

Investment rationale:

 

A strong player in formulation especially in life style therapeutic area: Alembic Pharmaceuticals presents an extensive range of branded and generic formulations that cater to diverse therapeutic segments. The list of therapeutic segment includes Cardio-Diabetic, Gynecology, Acute, Gastro, Dermatology, Urology, Hospital care and animal care etc. In domestic formulation, it has five brands (Azithral, Althrocin, Wikoryl, Gestofit, Roxid) in top 300 brands. APL, in therapeutic areas like Cardio, Gynecology, Anti-infective, cold and cough, has market share of 2.1%, 2.6%, 3.0% and 4.9% respectively.

 

Largest player in Azithromycin and has enough capacity to feed market amidst Covid-19 outbreak: Alembic is the largest player in the estimated Rs550-crore per month of azithromycin market with approx 30 per cent market share. The company makes the anti-biotic at its Panelav facility. The company in its recent media interaction has clarified that it has enough capacity and there is no raw material supply disruption from China as well as domestic availability. Recently, it has been heard that Azithromycin along with hydroxichloroquin are been used for possible treatment of Covid-19. Also, in a major relief to Alembic, SC set aside the Gujarat 2016 NGT order on closure of plant in Gujarat.

 

Robust infrastructure backed by huge ANDA and DMF pipeline: Alembic has manufacturing facilities in various locations in the country dedicated for both Formulation as well as Active Pharmaceutical Ingredients (API). The company is continuously focusing on building the product portfolio and has filed 183 ANDA (Abbreviated New Drug Application) cumulatively of which 119 have been approved. Of late, the company has ramped up the filings +25 per year versus 7-8 ANDAs four years back. Of these approvals, Alembic has launched 69 products so far. In addition to the ANDAs, APL has filed cumulative DMFs (Drug Master Files) to the tune of 109 till March 2020.

 

Strong financials and attractive balance sheet: The Company has strong balance sheet with leverage ratio of <0.52x as on March 2020. The EBITDA margin is +25% and return ratios +30%. The company has registered 15% CAGR growth in net sales in the last ten years while net profit has clocked 36% CAGR during the same period. During FY20, the company’s US front-end achieved milestone of USD250 million sales. The sales and net profit has clocked a growth of 17% and 42% YoY in FY20. All the growth segments were completely aligned in terms of having high growth molecules and high growth brands driving its key growth segments like Acute, CV, Gynaec and Gastro.

 

Outlook & Valuation: We believe generic pharma industry will do well in the current market scenario as it has seen a good correction in the last one year and is now re-rating amidst the ongoing Covid-19. The generics business constitutes 54% of the total revenue of Alembic Pharma and thus we believe the company would be a beneficiary of the current market situation. At current price, the stock is trading at 13.3x of its one year forward earnings which looks attractive and trading below historical valuation.

 

Duration of recommendation: Medium term.

 1) For long Alembic Pharma share price: Buy Alembic Pharma, target price Rs 1,100 ...

Best Regards