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Informist, Monday, Aug. 11, 2025
 

By P. Madhu Kumar

MUMBAI – Alkem Laboratories Ltd. is likely to report a modest year-on-year fall in consolidated net profit for the June quarter despite steady growth in the domestic formulations business and a recovery in rest-of-the-world sales. The decline is expected to be driven mainly by muted sales in the US and higher research and development expenditure. A weaker product mix is also seen offsetting gains from stable gross margins and robust growth in chronic therapies in the quarter.

The company is expected to report a consolidated net profit of INR 5.02 billion for the June quarter, down 7.9% on year, according to the average of estimates from seven brokerages. On a quarter-on-quarter basis, the profit is seen surging 64.2%, from INR 3.06 billion reported for the March quarter. Consolidated net sales are projected at INR 32.07 billion, up 5.8% on year and 2.0% on quarter.

HDFC Securities is the most optimistic on the quarterly results of Alkem Laboratories, projecting a net profit of INR 5.65 billion. The broking firm sees the company's June quarter earnings growth supported by about 9% growth in domestic formulations, 4% sequential rise in US sales, and 15% growth in international markets excluding the US. Motilal Oswal Financial Services has the lowest net profit forecast at INR 4.41 billion, citing a 12% year-on-year fall in US sales to INR 6.10 billion, muted overall sales growth, and lower operating leverage. Its revenue estimate is also the lowest, at INR 30.96 billion. Nuvama Wealth Management has the highest estimate for net sales at INR 32.71 billion.

Analysts expect the company's India performance to be led by chronic therapies such as vitamins, minerals, and anti-diabetics, which are likely to see double-digit growth. However, the acute segments--particularly anti-infective and gastrointestinal therapies--are expected to underperform, leaving a negative impact on the overall domestic growth rate. Nuvama Wealth Management estimates domestic growth at 9% on year, with chronic therapies up 13% and acute up 7%. YES Securities sees the company's India business growth at 8%, about 100 basis points higher than the Indian pharmaceutical market average.

The company's US business is seen to be a major drag in the June quarter. Most brokerages expect US sales to be flat or lower on year due to the absence of major product launches and delayed abbreviated new drug application approvals. Motilal Oswal foresees a 12% on-year fall in US sales, while Nirmal Bang Equities expects an 8% rise on a low base. Analysts note that the company did not have a meaningful US pipeline trigger in the June quarter and pricing pressure in the generics segment remains an overhang. US business contributed 19.6% of total sales of the company in the March quarter and 19.4% in the financial year 2024-25 (Apr-Mar), according to a report by Dolat Capital Market.

The rest-of-the-world segment is expected to post healthy double-digit growth, driven by market expansion and a favourable base. Nirmal Bang forecasts 10% year-on-year rise in this business, while HDFC Securities pegs the rise at 15%.

Higher research and development spending, estimated at over 6% of sales by some brokerages, and a weaker product mix due to the higher share of the acute segments are likely to weigh on earnings before interest, taxation, depreciation, and amortisation. Nuvama expects the company's EBITDA margin to be 19%, down from 19.8% a year earlier, factoring in a higher effective tax rate of 15% versus 11% in the year-ago period. YES Securities, however, anticipates sequential margin improvement as the June quarter is seasonally the strongest for gross margins. The company's EBITDA is projected at an average of INR 6.14 billion for the reporting quarter. The estimates range from INR 5.36 billion, by Motilal Oswal, to INR 6.54 billion, by HDFC Securities. While the year-on-year change is negligible, the quarter-on-quarter jump of nearly 57% is due to the lower base of the March quarter.

Analysts will pay keen attention to management commentary on plans to revive the US business, progress in biologics and medical technology initiatives, and the pace of growth of chronic therapies in India. Updates on regulatory inspections and potential product launches will also be key for the outlook. With margins already near the lower end of the company's historical range, cost discipline and traction for new products will be crucial to sustaining profitability through FY26.

Of the seven brokerage reports on the company available with Informist, four have a "buy" rating with an average target price of INR 5,702. Two brokerages have a "hold" rating. Only one brokerage has a "sell" rating. Monday, shares of Alkem Laboratories ended 1.7% higher at INR 4,844.50 on the National Stock Exchange. Alkem Laboratories is scheduled to announce its Apr–Jun earnings Tuesday.

Following are the Apr–Jun earnings estimates, in INR million, for Alkem Laboratories based on reports from seven broking firms, in descending order of net profit:

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Edited by Rajeev Pai

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