Alkem Labs hits record high, soars 8% on strong Q3 results, dividend bounty

Shares of Alkem Laboratories surged 8 per cent to hit a new high of Rs 2,699, on the BSE, on Monday after it reported a strong 56.8 per cent year on year (YoY) growth in consolidated profit before tax (PBT) at Rs 40.46 crore for the December quarter (Q3FY20). The pharmaceuticals company had PBT of Rs 25.81 crore in the year ago quarter.

Meanwhile, the board of directors of the company declared an interim dividend of Rs 22 per equity share for the financial year 2019-20. The company has fixed Saturday, February 15, 2020 as the record date for the purpose of payment of interim dividend.

Alkem Labs posted a 88.6 per cent YoY jump in its consolidated net profit at Rs 382 crore during the quarter under review on the back of healthy revenue growth and significant improvement in earnings before interest, tax, depreciation, and amortisation (Ebitda) margins.

Revenue from operations, meanwhile, grew by 13.3 per cent YoY during the quarter, accompanied by 450 basis points YoY improvement in Ebitda margin to 20.8 per cent from 16.3 per cent in the previous year quarter.

The management said the company’s outperformance in the Indian market is driven by strong brands, effective sales and marketing strategies, and new product launches. In the US market too, it grew at a healthy pace on the back of new product launches. The company’s efforts towards cost optimization and process improvement are steadily reflecting in financials, it added.

“Alkem is one of the few companies in the pharma space that is likely to report a consistent profit growth as investments in the domestic chronic space (around 2,100 reps) are largely behind the company, and it is not only likely to continue growing above market but new business will come at much higher margins,” analysts at Antique Stock Broking said in a result review note.

“US is clocking $ 300 million with 10-12 annual launches, has sufficient capacity for the next 3-4 years, and R&D spends are unlikely to exceed 6 per cent of revenue. Thus operating leverage is likely to be seen. Besides, softening of API prices and long-term API procurement contracts mean that gross margins are unlikely to slip below 60-61 per cent in the next couple of years. The only risk is the prolonged shutdown in China due to coronavirus fears,” it added. The brokerage firm maintains ‘buy’ rating on the stock with target price of Rs 2,840 per share.

At 10:05 am, the stock was trading 6 per cent higher at Rs 2,647 on the BSE, as against a 0.57 per cent decline in the S&P BSE Sensex. A combined 2,72,445 shares have changed hands on the counter on the NSE and BSE so far.