Hey there, folks! We’ve got some exciting news from the world of pharmaceuticals. Alkem Laboratories has just knocked it out of the park with their Q2 earnings, and it’s causing quite a buzz among brokerages. So, what’s all the fuss about? Let’s dive into the details.
Alkem Surprises with Strong Q2 Earnings
In a surprising turn of events, Alkem Laboratories, the pharmaceutical giant, has managed to exceed everyone’s expectations with their Q2 earnings report. Despite facing a bit of a sluggish growth period in the Indian market, they’ve managed to impress brokerages and prompt some of them to upgrade their ratings and price targets for Alkem’s stock.
The numbers speak for themselves – Alkem’s net profit saw a whopping 87.5 percent jump compared to the same quarter last year, landing at Rs 620.50 crore. Their revenue also climbed by almost 12 percent, reaching Rs 3,440 crore. And here’s the kicker: both their net profit and revenue left even the experts at CNBC-TV18 stunned, as they soared past the estimates of Rs 436.40 crore and Rs 3,366 crore, respectively.
But that’s not all. The operational performance has been nothing short of spectacular, with the EBITDA margin expanding to 21.7 percent in the September quarter, compared to 14.7 percent from the previous year. The margin also outshone the Street’s predictions of 16 percent.
What Drove This Earnings Boost?
So, what’s the secret sauce behind this remarkable performance? Well, it appears that a combination of factors came into play. An improved product mix in the US market and significantly lower input costs bolstered the margins. Additionally, Nomura, a prominent brokerage firm, attributes the stellar performance to lower costs and a favorable tax rate in the quarter.
Buoyed by Alkem’s fantastic Q2 earnings, Nomura didn’t hold back. They upgraded the stock’s rating to ‘buy’ and set a price target of Rs 4,963. What’s more, they are quite optimistic about Alkem’s pursuit of inorganic growth opportunities, given the company’s surplus cash.
Alkem’s Plans for the Future
Speaking of growth, Alkem is looking to expand its horizons in the pharmaceutical world. With ample cash in hand, they’re eyeing inorganic opportunities in chronic therapies and consumer healthcare segments. That’s a big move for the company’s future.
Moreover, Alkem has forecasted high-single digit growth for its India business in FY24, even though the Q2 results showed a modest 5 percent growth. The slower growth was attributed to a weak acute season due to sporadic monsoons, which led to fewer viral infections.
The company has also slightly raised its margin guidance for FY24 to 16.5 percent from the earlier 16 percent. Macquarie, while having an ‘underperform’ stance on the stock, commended Alkem’s margin guidance. However, they anticipate that the drugmaker’s profitability in Q4 might be impacted by an adverse seasonality effect.
Analysts’ Take on Alkem
Now, let’s see what the experts have to say. Nuvama Institutional Equities is pretty optimistic, seeing no major risks to Alkem’s sustained margin improvement. They believe that softening input prices, easing US price pressures, and the management’s focus on improving India’s productivity are key drivers.
Motilal Oswal is on board too, raising its earnings estimates for Alkem by 21 percent for FY24 and 11 percent for FY25. They are factoring in a larger share of high-margin products in the US generics segment, lower raw material costs, and a reduced effective tax rate. This has led them to expect an impressive 28 percent earnings growth over FY23-25.
But not everyone is equally enthusiastic. MOFSL thinks that Alkem’s current P/E multiples are in line with their five-year average, considering the earnings potential. So, they’ve given a ‘neutral’ call with a target price of Rs 3,920.
Alkem’s Stock Performance
And finally, the stock market action. As of 09.19 am, Alkem Labs’ shares were trading nearly 3 percent higher at Rs 4,135.50 on the NSE. The stock also saw a 5.3 percent boost on November 7 after the earnings announcement, closing at Rs 4,027.35 on the NSE.
Disclaimer:
As always, it’s essential to remember that the views and investment tips expressed by investment experts are their own and not necessarily those of the website or its management. Before making any investment decisions, it’s advisable to consult certified experts.
So, there you have it, folks! Alkem Laboratories has taken everyone by surprise with its Q2 performance, and it’s a hot topic in the world of finance. We’ll keep our eyes peeled for more updates on this intriguing success story. Stay tuned!
