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Alembic Pharmaceuticals | Q1FY14 Result & Concall Update




IndiaNivesh Securities Pvt Ltd


08 Aug 2013





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Alembic Pharmaceuticals Ltd.(APL) | Q1FY14 Result & Concall Update Almost in line with estimates Revenue was above estimates on account of higher sales from International generics business: APL’s Q1FY14 revenue was above estimates & grew 16.5% y-o-y (13.3% q-o-q) to Rs 4.27 billion (V/s INSPL estimates = Rs 3.96 billion) in Q1FY13 on the back of ~86% y-o-y growth from International generics business linked with Desvenlafaxine supply to US market along with its partner Ranbaxy at the end of March 2013 & commencement of new formulation facility. APL’s domestic formulation business grew 12.1% y-o-y on the back of healthy growth of 26% in specialty business partially offset by slow growth of only 3% y-o-y in acute segment. Overall growth was partially offset by ~6% y-o-y decline in API business linked with margin rationalization strategy of the company. Valuation: At CMP of Rs 156, the stock is trading at P/E multiple of 14.2x of FY14E & 11.6 x of FY15E earnings estimates. We had recommended buy on the stock at prevailing price of Rs 49 in our “initiating coverage report released on 7th June 2012” with the target price of Rs 79 & further updated to Rs 163, which has been achieved. Anticipating ramp up in new formulation facility, ~140 bps expansion in EBITDA margins by FY15E, ~30% y-o-y growth from international regulated market, ~15%CAGR in domestic formulation business, we continue to maintain positive view on the stock. Further, we believe that Desvenalafaxine ramp up would be slow and consistent. However, we believe that all positives are factored in the stock price at current level. We value company at 12x of FY15E earnings estimates & maintain target price to Rs 163. Due to limited upside potential from current level, we revise our rating from buy to HOLD.

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