Buy This Pharma Stock With Strong API Footprint, For 13% Returns, In 6 Months: HDFC Securities Recommends

Renowned brokerage firm HDFC Securities has given a buy rating to the stocks of Alembic Pharmaceuticals Ltd. for a 13.33% return in 6 months. In H1FY22, Alembic Pharmaceuticals Ltd.'s domestic business has recorded a robust 37% growth at Rs. 989 crore (FY21 growth at 5%).

Target Price

The Current Market Price (CMP) of Tata Motors is Rs. 800.30. HDFC Securities has estimated a Target Price for the stock at Rs. 907. Hence this company is expected to give a 13% return, in 6 months (2 quarters).

Stock Outlook
Current Market Price (CMP)	Rs. 800.30
Target Price	Rs. 907
6 months returns	13.33%

Company performance

Alembic Pharmaceuticals Ltd.'s total revenue was Rs. 5,393 crore in FY 21, which is expected to grow to Rs. 5,382 crore in FY 22. The company's EBITDA stood at Rs. 1558 crore, which is expected to grow to Rs. 1053 crore. Additionally, the company's PAT stood at Rs. 1178 crore, which is expected to grow to Rs. 750 crore. Additionally, Alembic Pharma has concluded a large CAPEX program wherein it has invested around Rs. 600-700 crore per year over FY18-21. Although their revenues declined 11.3% YoY to Rs. 1292 crore, in Q2FY22, but the domestic formulations business grew 22.7% YoY to Rs. 509 crore, led by a faster recovery in acute and specialty segments.

Comments by HDFC Securities

Maintaining a buy rating, HDFC Securities stated, "Alembic Pharma has presence across domestic formulations, International formulations, API and veterinary business. The company derived 40% of revenue from US formulations, 28% from India, 18% from API, and 14% from RoW markets in FY21. US business registered 32% CAGR over FY18-21 to Rs. 2163 crore on the back of new launches." However, "US business is expected to bottom out in FY22 and would resume growth trajectory in FY23 led by new product pipeline spread across multiple therapies including products approved but yet to be commercialized."

About the company

Alembic Pharmaceuticals (Alembic) is one of the leading Pharmaceutical companies with a global presence. It is a vertically integrated company engaged into manufacturing and marketing of branded formulations, international generics, and API products and has 3 R&D centers. Alembic's business has International generics (USA, Canada, Europe, Australia, South Africa, and Brazil), Domestic branded business, and API business. The international business segment contributed to 54% of revenue in FY21, while domestic branded business constitutes around 28% of the overall sales.

Disclaimer

The above stock was picked from the brokerage report of HDFC Securities. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.