Alkem Labs slumps 7% post Q4 show; brokerages see downside up to 15%

Shares of Alkem Laboratories slumped 6.9 per cent at Rs 4,900 on the BSE in Thursday’s intraday trade. The crack in the stock price of Alkem Labs came despite its profits soaring multifold on a year on year (Y-o-Y) basis in the fourth quarter of the fiscal year 2023-24 (Q4FY24).

On Wednesday, Alkem Laboratories reported a 313.9 per cent surge in its consolidated net profit, reaching Rs 293.5 crore in the quarter ending March 31, 2024, compared to Rs 70.9 crore in the corresponding period last year.

In Q4FY24, revenue from operations stood at Rs 2,935.8 crore, marking a 1.1 per cent increase from Rs 2,902.6 crore in the same period a year ago.

During the quarter under review, the company's earnings before interest, taxes, depreciation, and amortisation (Ebitda) rose by 13.8 per cent to Rs 402 crore, accompanied by a 14 per cent increase in margin.

For the full fiscal year 2023-24, the net profit surged by 82.4 per cent to Rs 1,795.7 crore, while revenue from operations saw a 9.1 per cent uptick, reaching Rs 12,662.5 crore.

Additionally, the pharmaceutical giant proposed a final dividend of Rs 5 per equity share with a face value of Rs 2 for FY24.

The brokerage stance after Alkem Labs Q4 show remained mixed as some gave it a neutral rating on the stock, while others gave it an underperforming tag. 

According to analysts at Nuvama Research, Alkem’s Q4FY24 revenue and Ebitda missed its  consensus estimates by 8 to 9 per cent  each while PAT missed estimates by 13 per cent. Domestic business was also flat YoY due to high base and low seasonality. 

The brokerage said that Alkem guiding for 10 per cent revenue growth and flat margins looks conservative, however it could see a strong anti-infective season in FY25E. Analysts at the brokerage have predicted an 11 per cent YoY revenue growth and EBITDA margin growth of

18.2 per cent in FY25E. 

“We are cutting FY25E/26E EPS by 5 per cent/2 per cent and rolling over to FY26E. We are downgrading the stock to ‘HOLD’ (from ‘BUY’) after the recent sharp rally and tax rate spike (25 per cent) in FY27E. Our target price is Rs 5,730 (earlier Rs 6,130),” Shrikant Akolkar, Aashita Jain, and Gaurav Lakhotia of Nuvama wrote in a result update. 

Those at Motilal Oswal, reduced their earnings estimates by 4 per cent and 2 per cent for FY25 andFY26, respectively, factoring in an increased opex related to the Enzene facility in the US, and higher R&D spend. 

At 27x PE multiple on 12 months forward earnings, the brokerage arrived at a price target of Rs 5,390. 

Meanwhile, according to reports, global brokerage firm Jefferies maintained its 'Underperform' tag on Alkem with a target price of Rs 4,200 per share, while JP Morgan gave it a ‘Neutral’ rating, targeting its stock price at Rs 5,445. Furthermore, HSBC gave a ‘Hold’ tag to the company at target price of Rs 4,880.

At 10:31 AM; the stock of the company was down 6.31 per cent at Rs 4,935.55 per share on the BSE. By comparison the S&P BSE Sensex fell 0.53 per cent. Alkem Labs is presently trading at a price to earnings multiple of 35.29 times.