Motilal Oswal has given Buy recommendation for Alkem Laboraties with a target price of Rs. 3430 in its research report issued on Feb 06, 2021

Motilal Oswal’s research report on Alkem Laboraties

Alkem Lab (ALKEM) delivered a 3QFY21 performance below our expectation, weighed by considerable return of operational cost in the Domestic Formulations (DF) segment. The US Generics segment sales run-rate is expected to pick up, led by new launches, in the near term. We reduce our EPS estimate by 3%/5%/2%, factoring in an increase in marketing and promotional spend with the easing of the lockdown in the DF segment. We continue to value ALKEM at 23x 12M forward earnings to arrive at TP of INR3,430. We remain positive on ALKEM’s outperformance (v/s industry) in DF, led by a) outperformance in the Chronic therapy, b) gradual recovery in the Acute segment, c) the introduction of biosimilars in India/EMs, and d) a healthy ANDA pipeline for US generics. Maintain Buy.

Outlook

We lower our EPS estimates for FY21/FY22/FY23E by 3%/5%/2%, factoring in increase opex for the DF business. We value ALKEM on 23x 12M forward earnings to arrive at Target Price of INR3,430.

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