Motilal Oswal Recommends Buying This Pharma Stock For Good Return In Near Term

Brokerage firm Motilal Oswal recommended investors buying the stocks of Alkem for an 18% return. The firm thinks, "ALKEM, which garners maximum sales from the DF segment (70% of total sales), is well-placed to reap better business prospects as compared to its peers. It also has multiple levers to outperform the India Pharma market (IPM) in the near to medium term."

Target Price

The Current Market Price (CMP) of Alkem is Rs. 3271. Motilal Oswal has estimated a Target Price for the stock at Rs. 3870. The stock is expected to offer an 18% upside, in 1 year.

Stock Outlook
Current Market Price (CMP)	Rs. 3271
Target Price	Rs. 3870
1 year return	18.00%

Company performance

The company's sales in FY 21 were recorded at Rs. 4.4m, which is expected to be at Rs. 3.7m. Their EBITDA in FY 21 was recorded at Rs. 19.3m, which is expected to be at Rs. 18.8m. However, there has been a moderation in FY22 (almost flat YoY in 9MFY22) due to significant price erosion in the US base portfolio (81% of exports). However, ALKEM remains on track to file 12-15 ANDAs and subsequently keep up the pace of launches. Non-US exports (19% of total exports) remain on a healthy growth path on better traction in existing products as well as launches (35% YoY growth in 9MFY22).

Comments by Motilal Oswal

Motilal Oswal commented, "Given the turmoil on the international front, the branded Domestic Formulation segment (DF) remains well protected. It is also on the growth path, with the easing of Covid-related restrictions. We cut our FY23/FY24 estimate by 6%/7% to factor in raw material and logistics-related headwinds. ALKEM remains better placed to benefit from an improving outlook in the DF segment. We expect a 13% sales CAGR in the DF segment over FY22-24. We expect 11% sales CAGR in exports over FY22-24 to Rs. 36b."

About the company

ALKEM - is India's Generic and specialty pharmaceutical company, and 33% of its revenue is generated via offshore sales. Our portfolio includes illustrious brands like Clavam, Pan, Pan-D and Taxim-O, which feature amongst top 50 pharmaceutical brands in India. Exports, largely comprising of the US and other select geographies, grew at 18% CAGR over FY16-21. On December 23rd, 2015, when, Alkem completed its Initial Public Offering (IPO) and was listed on the Bombay Stock Exchange Limited and the National Stock Exchange of India Limited.

Disclaimer

The above stock was picked from the brokerage report of Motilal Oswal. 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.

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