Expect growth to be sustainable for specialty business – Alembic Pharmaceuticals

Expect growth to be sustainable for specialty business – Alembic Pharmaceuticals

Update on the Indian Equity Market:

On Thursday, NIFTY closed in red at 14,590 (-0.4%). Top gainers in NIFTY50 were Tata motors (+6.4%), Bajaj Finance (+2.7%), and Reliance (+2.6%). The top losers were ONGC (-3.3%), Tata Steel (-2.9%), and Coal India (-2.6%). The top sectoral losers were PSU BANK (-3.3%), REALTY (-2.6%), and METAL (-2.2%) and there were no sectoral gainers.

Excerpts of an interview with Mr. Shaunak Amin, MD – Alembic Pharma (APLLTD) with CNBC TV18 dated 20thh January 2021:

  • In the trailing quarters, they had almost 10 quarters of fantastic growth in the US business, so the base had been built up quite high. This quarter was a bit of a competitive intensity which led to a slowdown.
  • US sales have slowed down in this quarter.
  • On the Indian side of the business, they haven’t launched any of the COVID-specific products. Whatever growth they did see in Q3 was on the back of a better performance largely by speciality business.
  • The acute portfolio for them was very sluggish not just for them but for the whole market.
  • The company expects growth to be sustainable for speciality businesses.
  • It is the speciality business they expected to be sustainable going forward, acute side of the business the market for that still hasn’t recovered back to normal levels in terms of growth.
  • As long as the market continues to underperform on the acute side of things, it is hard to show large growth numbers.
  • They haven’t pursued any specific cost-cutting activities with respect to COVID. In terms of their operational expenses, they try to maintain their OPEX at the same level pre-COVID, during COVID at the current level now.

Consensus Estimate: (Source: market screener and investing.com websites)

  • The closing price of APLLTD was ₹ 942/- as of 21-January-2021.  It traded at 16x /18x/17x the consensus earnings estimate of ₹ 59.3/ 51.2/ 56.2 for FY21E/FY22E/23E respectively.
  • The Consensus price target of APLLTD of ₹ 1,121/- implies a PE multiple of 20x on FY23E EPS estimate of ₹56.2/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”


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