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Anand Rathi
Alembic Pharmaceuticals (Buy)
CMP: ₹590.05
Target: ₹740
Key takeaways: a) US sales to double to $400 million in the next few years: Alembic Pharmaceuticals expects its US base of $200-220 million to double to $400 million in the next couple of years. It expects to launch 17-20 products a year and its product range is set to expand as it reveals the oncology (oral solids plus injectables) pipeline which is now being developed.
b) Domestic business streamlined; expected to grow 12-13 per cent in FY21e: For 9M FY20, domestic formulations have been flat at ₹10.8bn as the streamlined distribution network had yet to show results. Most of the restructuring is now complete and from FY21 management expects growth in double digits.
Outlook: Alembic has invested nearly ₹2bn in new capacities (Aleor plus oncology and OSDs) aiming to diversify its product range in the US and improve the quality of its filings. Further, a turnaround in its India base is likely to help maintain double-digit growth for the next few years. We upgrade the stock to a Buy, with higher price target of ₹740 (earlier ₹624), based on 18x FY22e EPS.
Risks: Regulatory hurdles, delay in product approvals, pricing risk in India.
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