Buy Alkem Laboratories, target price Rs 3315: Edelweiss

Buy Alkem Laboratories, target price Rs 3315:  Edelweiss

has buy call on with a target price of Rs 3315. The current market price of Alkem Laboratories Ltd. is Rs 2620.

Alkem Laboratories Ltd., incorporated in the year 1973, is a Large Cap company (having a market cap of Rs 30785.60 Crore) operating in Pharmaceuticals sector.

For the quarter ended 31-12-2020, the company reported a Consolidated Total Income of Rs 2414.45 Crore, up .67 % from last quarter Total Income of Rs 2398.34 Crore and up 9.27 % from last year same quarter Total Income of Rs 2209.70 Crore. Company reported net profit after tax of Rs 463.85 Crore in latest quarter.

Investment Rationale
The brokerage forecasts FY23 EBITDA margin would be 21.7%, implying an uptick of ~400bp over FY20. By FY23, Alkem’s RoCE are expected to reach 21.6%, a modest discount to its mid-cap peers, but superior to large-cap pharma’s. A net-cash balance sheet, potentially consistent FCF (6x over FY20) and steady returns ratios provide additional comfort. It values Alkem at 24x Jun-22E EPS (discount to Ipca and Torrent), which yields a fair value of INR3,315.

Promoter/FII Holdings
Promoters held 62.4 per cent stake in the company as of Dec 30, 2020, while FIIs held 4.1 per cent, DIIs 13 per cent and public and others 20.5 per cent.

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