Earnings Outlook
Strong domestic sales to aid Alkem Labs Oct-Dec revenue
This story was originally published at 19:00 IST on 6 February 2025
Register to read our real-time news.Informist, Thursday, Feb. 6, 2025
By Arya S. Biju
MUMBAI – Analysts expect Alkem Laboratories Ltd. to report low-to-mid single-digit growth in consolidated net sales for the December quarter, driven by strong domestic sales and growth in other markets. However, weaker performance in the US business could offset this growth and higher operating costs are likely to put pressure on the company's margins.
The company's consolidated net sales for the quarter is expected to rise 3.4% on year to INR 34.37 billion, according to the average of estimates from five brokerages. The estimates for the company's revenue range from INR 35.16 billion by Nirmal Bang Equities Pvt. Ltd. to INR 33.06 billion by Motilal Oswal Financial Services Ltd.
According to analysts, the company will report a marginal on-year fall in its consolidated net profit for the quarter at INR 5.92 billion. The firm had reported a consolidated net profit of INR 5.95 billion in the year-ago quarter. YES Securities (India) Ltd. has the highest estimate of INR 6.47 billion for the company's net profit while Nuvama Wealth Management Ltd. has the lowest estimate of INR 5.39 billion. Sequentially, the net profit is seen declining 14% while revenue is seen rising marginally.
The company's domestic formulation business is likely to grow 9% on year to INR 24.34 billion for the December quarter, HDFC Securities Ltd. said in an earnings preview. Motilal Oswal, however, expects moderate growth in the acute therapeutic segment to drag down the domestic formulation business. It expects the segment to clock 4% on-year growth. Nuvama sees a modest fall in the trade generics business to result in a slight underperformance in the company's India business, though offset by seasonality benefits. It expects Alkem's India business to grow 8% on year.
Alkem's international business, excluding the US, is expected to report around 10% on-year growth, HDFC Securities said. According to Nuvama, sales in other markets are expected to grow 12% on year. For the previous quarter, the pharmaceutical company posted a 13% on-year fall in sales from its international operations to INR 9.18 billion.
Alkem's US sales are expected to decline 14% on year to $71 million for the quarter on slower off-take from new launches and rationalising of the portfolio, Motilal Oswal said in an earnings preview. Nuvama and HDFC Securities expect US sales to fall 4% on year to $79 million for the quarter. However, on a sequential basis, HDFC Securities sees the US business growing, led by traction in the generics of Suprep and Pradaxa.
The pharmaceutical and nutraceuticals manufacturer is expected to report earnings before interest, taxes, depreciation, and amortisation of INR 6.98 billion, down 1.4% on year and 7.3% on quarter, according to an average of estimates from five brokerages. Analysts expect the EBITDA margin to be in the range of 19-21.3% for the quarter. Nuvama sees the company's EBITDA margin contracting sequentially due to US operating expenditure.
Alkem Laboratories will announce its earnings on Friday. Investors will watch out for business prospects from the generic of Valsartan sacubitril in the US market, Motilal Oswal said. Of the seven brokerage reports available on Alkem Laboratories with Informist, three have a 'buy' or equivalent rating on the stock while four have a 'hold' or equivalent rating.
Shares of Alkem ended at INR 5,255.70 on the National Stock Exchange on Thursday, up 2.7%. The stock has fallen 6% since the announcement of its Jul-Sept earnings on Nov. 13.
Following are the Oct-Dec earnings estimates for Alkem Laboratories based on reports from five broking firms in descending order of net profit estimate (in INR million):
Brokerage Firm | Net sales | Net profit | EBITDA |
YES Securities (India) Ltd. | 33,489.00 | 6,466.00 | 7,331.00 |
HDFC Securities Ltd. | 35,155.00 | 6,198.00 | 7,101.00 |
Nirmal Bang Equities Pvt. Ltd. | 35,157.00 | 6,038.00 | 7,207.00 |
Motilal Oswal Financial Services Ltd. | 33,061.00 | 5,526.00 | 6,612.00 |
Nuvama Wealth Management Ltd. | 34,975.00 | 5,385.00 | 6,632.00 |
Average | 34,367.40 | 5,922.60 | 6,976.60 |
End
US$1 = INR 87.57
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Subhojit Sarkar
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