Alkem Labs — Long-Term Growth Outlook Stays Intact: HDFC Securities

HDFC Securities Retail Research

Alkem Laboratories Ltd.’s chronic business continues to grow better than market growth rate, leading to improvement in its market share and ranking in therapy segments of central nervous system, anti-diabetic, cardiology and dermatology. International business mainly led by U.S., delivered a healthy performance on the back of new product launches and market share gains in the existing products.

Alkem Labs looks to outperform in the chronic segment on the back of-

1. new product launches including in-licensed products,

2. improved sales force productivity and

3. by building strong brands.

Alkem Labs has filed a total of 169 abbreviated new drug applications and two new drug applications with the U.S. Food and Drug Administration and has received approvals for 129 ANDAs (including 14 tentative approvals) and two NDAs as on Dec-2022.

It has current good manufacturing practice compliant manufacturing facilities and own front end to distribute and market its products. We expect 11.3% compound annual growth rate in revenue led by 11.5% growth in India business and 11% growth in U.S. business over FY23-25E.

Higher contribution from chronic portfolio, improving medical representative productivity, falling raw material costs and rising revenue from U.S. could lead to margin expansion of 250 bps over the next two years. Healthy revenue and steady margin of around 17-18% could lead to strong 21% CAGR in profit after tax over the same period.

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