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Equirus
Alembic Pharma (Sell)
CMP: ₹596.8
Target: ₹514
Alembic Pharmaceuticals is engaged developing formulations and active pharmaceutical ingredients (API). The company focusses on anti-infective, analgesic and, cough and cold therapies. It also focuses on therapies, such as cardiology, diabetes, gynaecology, gastrointestinal, orthopedic, dermatology and ophthalmology.
Our analysis of Alembic Pharmaceuticals’ US pipeline suggests that a) the near-term pipeline is weak and majorly commoditised; b) filings from newly-built facilities of oncology, injectables, dermatology and ophthalmic are yet to pick up; and c) key niche launches are lined up only towards FY20/FY21-end.
A weak pipeline, long gestation periods for newly-build facilities, along with receding tailwinds from high-value Valsartan revenues indicate pressures and muted return ratios for Alembic Pharmaceuticals in the near- to mid-term. At current valuations (22x/25x FY19E/FY20E P/E), the stock fully factors in the company’s near-to-mid term pipeline, leading us to assign a ‘short’ rating (‘reduce’ earlier) with a March 20 TP of ₹514 (₹536 earlier) set at 21x P/E.
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