Is anyone covering this.
I went through the last concall of Alkem Labs.
My understanding is that they are looking to grow at par or better than Indian Pharma. Chronic is growing well and Acute is helping (though there is some seasonality). The raw materials prices are stable and helping recovery of bottomline. Biosimilars division is tiny and not expected to impact topline significantly atleast for another few years. US price erosion has come down to single digits now (earlier double digits). No major capex in sight except for an investment in the US. They are doing very well in ROW markets and expect to continue to do so.
Currently price at around 35 times earnings, I expect nothing extraordinary going forward - maybe 10-15% (at or above Indian Pharma growth). They had a great 2020 and 2021 due to uptick in Acute business; and not so good 2022 due to increase in raw materials prices and price erosion, etc. They expect Chronic segment (around 10% higher margin than Acute) contribution and debottlenecking to help improve margins (minor) going forward.
Yesterday there was a news with allegations of 1000 cr tax evasion against the company (read on social media, not reliable) and therefore the price dopped by 6% however they came out with clarification that this is completely false, and nothing to worry about.
I am waiting to see how the India Pharma and ROW story pans out - though I do not expect great returns from here (but who knows). It is only a small part of my portfolio and no transactions in the last 6 months. Sitting at much lower prices hence the cushion to wait and watch.
Alkem Labs -
Key highlights from FY 24 -
Continues to rank no 1 in Anti Infectives, No 2 in Vit/Min space in India
India business contributes to 68 pc of sales, grew by 5.4 pc
US business contributes to 21 pc of sales, grew by 10 pc
Rest comes from RoW mkts ( LATAM, Australia, EU ), grew strongly at 33 pc
Cash on Books @ 3550 cr
Anti-Infectives mkts were sluggish throughout FY 24, which affected company’s India performance. However, the company continued to do well in Anti-Diabetic, GI, Vit/Minerals and Derma therapies
Lesser pricing pressures in US and descent volume growth in US + RoW business helped improve overall gross margins. Company believes that the worst of pricing pressures in the US business should now be behind
Company’s domestic biosimilar business ( under its Subsidiary - ENZENE ), with 7 brands continues to ramp up well
Aim to grow revenues by 10 pc in FY 25 with stable gross and EBITDA margins ( with an upward bias )
Capex lined up for FY 25 @ around 600 cr
Expecting the anti-invectives mkt to pick up in FY 25 ( as FY 24 was exceptionally weak for this segment ). If this happens, company may outperform its guidance
30 pc of company’s India products are under NLEM
Company has the largest trade generics business in the country. At the same time, the branded generics business continues to do well. Company believes, both can do well simultaneously
As the company’s chronic business ramps up in India, Margins should improve further over the medium term
Launched 3 new products in US in FY 24. Going to launch 6 new products in US in FY 25
Expect to maintain 4.5 of sales as R&D expenses going fwd
Setting up a Bio-Similars plant in US under its Bio-Similars subsidiary - ENZENE. It’s mainly going to engage in contract manufacturing operations. Expect it to contribute meaningfully from FY 27. Capex required here should be around 400 cr
MR productivity for the company is 4.5 lakh / month. On the chronic business side, its about 3.5 lakh / month - clearly there is a lot of headroom to improve the productivity here
Company’s share of Chronic business is low at present @ 18 pc. There is a huge scope of improvement here. Expect it to cross 20 pc in next 2-3 yrs
Total MR strength for the company is around 12000
Trade generics contribute to around 20 pc of company’s India business
Company is working on another 5 biosimilars to be launched in India under its subsidiary - ENZENE
Cash on books - in all likelihood to be used to inorganic acquisitions - specially in the Chronic segment. Actively looking out for the same
Company is setting up a new business division - to manufacture medical devices. Will update investors as the business goes commercial. Focus here will be on the domestic Mkts to begin with
Disc: holding, Biased, Not SEBI registered