ALKEM LABORATORIES BUY

 

Dear investor,

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

 

Company	CMP	Target	BSE Code	NSE Code
Alkem Laboratories Ltd.	2,340.	2,498.0	539523	ALKEM

 

Alkem Laboratories Ltd. was incorporated in the year 1973. The company is a manufacturer and supplier of high-quality branded generics, generic drugs, active pharmaceutical ingredients, and nutraceuticals in India and over 50 countries internationally. Alkem has a comprehensive portfolio of over 800 brands covering all the major therapeutic segments and a robust pan-India sales and distribution network. The company has been ranked amongst the top ten pharmaceutical companies in India in terms of domestic sales for the past 15 years.
 

Investment rationale
 

Strong product portfolio with presence both API and Formulation: The Company has a comprehensive portfolio of over 800 brands covering all the major therapeutic segments. Alkem ranked the No.1 Anti-infective company in India and has remained unchallenged. The company is featured amongst the leading pharmaceutical companies in the therapeutic segments of Gastro-intestinal, Pain management, and Vitamins / Minerals / Nutrients. It has leading iconic brands like Clavam, Pan, Pan-D, Taxim, and Taxim-O featuring amongst the top 50 pharmaceutical brands in India. In the domestic market, Alkem’s market share in anti-infective, gastro-intestinal, pain/analgesics, and vitamins/minerals/nutrients is pegged at 1,3,3,4 respectively.

 

Robust product pipeline, global footprint to help to mitigate any market-specific slowdown: In the fast-growing chronic therapy segments of neuro/CNS, cardiology, anti-diabetes, and dermatology, the Company is taking rapid strides to emerge as one of the faster-growing companies in the country. The Company looks to outperform in the chronic segments on the back of new product launches including in-licensed products, effective sales, and marketing strategies, improved sales force productivity, and building strong brands. The company derives nearly 32% of revenue from the overseas market. In the US market, the Company has developed a healthy pipeline of products with over 144 ANDA filings of which more than half are yet to be commercialized. The product development is backed by robust infrastructure comprising 21 manufacturing facilities and 5 global R&D centers (500 scientists) located across India and the US. Alkem spends nearly 6% of sales on R&D. While the Company has a presence in over 50 international markets apart from the US, it is looking to intensify focus on select markets like Australia, Chile, Philippines, Kazakhstan, East Africa, and Europe.
 

Pan India presence, strong industrial outlook: Alkem has pan India presence with 9000+ field force, 7000+ stockiest, 40+ sales depots backed by 14,500 workforces. The global pharmaceutical industry is expected to grow at 3-6% compound annual growth rate (CAGR) over the next five years to cross US$1.5 trillion by 2023. India's pharmaceutical market is expected to grow at 8-11% CAGR over the next five years, the fastest amongst the BRIC nations, to reach US$28-32 billion by 2023. India’s healthcare spends as % of GDP is just above 1% which is the lowest amongst major developed and emerging nations.

 

Attractive financials and valuations: Alkem is virtually a debt-free company on a net basis.  It generates healthy EBITDA margin and returns ratios which are +18% and RoCE of nearly 16%. The company is generating healthy growth in revenue and profit with a steady dividend payout of 25-30% which translates into a yield of nearly 1%. The performance in the recent quarter has been robust with 20-35% growth in net sales and much higher growth in profits. Even in the current lockdown, it had registered 10% and 12% YoY growth in net sales and profit during Q4. At the current price, the stock is trading at 25x of its FY20 consolidated earnings.

 

Duration of recommendation: Short to Medium term.
 

Best Regards,