Alkem Laboratories: Company open to making strategic acquisitions in India and US

EBITDA grew 21% YoY, led by 11% YoY sales growth (+12% YoY India, 16% QoQ in the US), higher gross margin (+75 bps YoY), and cost controls (SG&A/ R&D – 5%/-6% YoY), which was partly offset by higher staff cost (+15%). The company retains its guidance for FY26 – India business to beat IPM (Indian Pharmaceuticals Market) growth by 100-150 bps. Mid-single digit growth is expected in the US and international business (ex-US).  Gross margin expected to sustain at ~64%, and the EBITDA margin to remain steady at 19.5-20% in FY26, with R&D spend at 4.5-5% (loaded more towards H2FY26).

While the company expects to sustain the growth momentum in India and international business (ex-US), it remains conservative on US growth despite new launch visibility due to price erosion in the base business. Moreover, it expects to improve EBITDA margin by 100 bps p.a. for the next few years and targets achieving mid-20s margin.

Its recent initiatives are on track, with the initiation of commercial operations of its CDMO business (Enzene US) and MedTech business (Exactec); the focus is to scale up the business, and it expects to break even in the next couple of years.

The company is open to strategic acquisitions (net cash INR 48.7 bn) in India (chronic focus) and the US (high-margin business/products). Factoring in Q1FY26 performance, we have tweaked our EPS for FY26/27E and revised TP (Target Price) to INR 5,700 (29x Q1FY28E EPS). ADD stays as we expect the India business to remain steady with ~10% CAGR over FY25-28E and a gradual scale-up in the US business with steady improvement in margin.

 Disclaimer : This content is only for informational purpose. It does not make any recommendation to act or invest. The target price recommendation given  are general in nature and not specifically for you. They do not consider your unique risk tolerance and investment objectives.

 Source : HDFC Securities Institutional Equities

 Full Report : https://www.hdfcsec.com/hsl.docs/HSIE%20Results%20Daily%20–%2013%20Aug%2025%20-%20HSIE-202508130652556341486.pdf?t=138202565458815