Alkem Laboratories Limited IPO Message Board (Page 2)

at 12.30

NR 2.3 x
retail 0.30 x

Indicative price 1195

many people do however STCL should be covered by STCG

just taking PE of present EPS as a number is wrong more important is what would be the PE say in 2 years In case of many still company and banks EPS will fall big time so future PE will be high when u compare with Alkem whose EPs will grow nd forward looking PE will be low..... share value increase if the future EPS projects is high

take team lease market happy to high PE of 60 bcoz they reckon EPS will and this will bring down the PE

CMP: INR1,319 Target price: INR1,751(+33%) Buy from Motilal Oswal

Strong results Margins continue to surprise positively
Alkem reported strong 3QFY16 results with net sales at INR 12.7b, up 29% YoY
driven by strong domestic performance (up 28% YoY) and impressive ramp-up in
US sales (up 19% YoY). EBITDA came in at INR2.3b, up 38% YoY (16% above our
est) with EBITDA margin of 18.5% (up 114bps YoY). Sustenance of high margins
(QoQ) is primarily attributed to robust sales in US and India and lower R&D at
(3.4% of sales- ~100bps below est). PAT came in at INR 1.9b, up 17% YoY (16%
above our est) despite lower other income and higher tax rate. We believe market
leadership position in key acute therapies will help provide sustainability whereas
expanding presence in high growth areas of chronic segment will help drive
growth.
Domestic business continues to outperform industry growth: Domestic business
growth for the company stood at ~28.4% YoY. This strong growth is primarily
driven by acquisition of a) Indchemie and Catchet, b) impressive growth in
established therapies, c) market share gain in emerging therapies. Excluding the
acquisitions, base business grew at steady pace of >13% YoY. According to AIOCD,
secondary sales growth in 3Q for Alkem stood at 15.7% YoY (vs industry growth of
14.3% YoY) providing visibility of strong growth ahead. The new price control list
will have a one-time impact of <1% on domestic sales growth for Alkem. We have
already built this in our estimates.

Valuations attractive sticky profit provides comfort: Our TP of INR1,750 for Alkem
is based on 20x FY18E PER (~10-15% discount to peers). We argue for a multiple rerating
going forward given the superior earnings growth profile (>30% EPS CAGR
between FY15-18E), improving return ratios (ROICs to improve to ~22% by FY18E vs
16% in FY15) and net cash balance sheet. We have increased our FY16E EPS est by
~4% on the back of strong 3Q performance and margin sustenance