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Alembic Pharmaceuticals 3QFY2013 performance highlights and results update

Contributed by Angel Broking

Alembic Pharmaceuticals (Alembic)’s 3QFY2013 results have come above our expectations on the operating front. On the sales front, the company grossed sales of Rs.369cr, registering revenue de-growth of 3.3% yoy, below our expectations of Rs.426cr. On the operating front, the company posted an OPM of 18.7% vs an expectation of 13.6%. This led the net profit to come above expectations at Rs.48cr (our expectation was of Rs.29cr). At the current market price, the stock is trading at an attractive valuation. Hence, we maintain our Buy view on the stock.

Results above expectations on operating front: Alembic reported revenue de-growth of 3.3% yoy to Rs.369cr; the domestic formulation business however put in a decent performance, registering a growth of 14.6% yoy. The exports segment de-grew by 21.7% yoy, impacted by de-growth of API exports (which de-grew by 53.0% yoy). The formulation exports on the other hand grew by 2.7%. On the operating front, the company posted an OPM of 18.7% vs expectations of 13.6%, which led to the net profit to come in above our expectations at Rs.48cr (vs our expectation of Rs.29cr).

Outlook and valuation: Alembic’s growth and profitability profile has improved post the restructuring carried out by the management. Over FY2012-14, we expect the company to post a CAGR of 9.0% and 17.1% in sales and net profit respectively. At the current market price, the stock is trading at attractive valuations. Hence, we maintain our Buy recommendation on the stock with a target price of Rs.95.