Alkem Laboratories’ revenue in Q4FY18 grew by 20.9% yoy to Rs1,513.2cr. EBITDA declined by 23.8% yoy to Rs113.8cr from Rs149.3cr in Q4FY17. EBITDA margins in Q4FY18 were at 7.5% vs. 11.9% in Q4FY17 and 20.7% in Q3FY18. PAT declined by 51.6% to Rs66.3cr in Q4FY18 vs. Rs137cr in Q4FY17.
The revenue are ahead of the street estimates, while EBITDA and PAT are below the street estimates.
The main reason that the company has seen decline in the profitability was 33.7% yoy increase in the material cost and 30.7% yoy growth in the staff cost.
Other expenses for Q4FY18 include Rs28.3cr on account of net loss on fair valuation of current investments. Adjusted for this, EBITDA could have been Rs142.1cr.
In Q4FY18, the company has utilized its previously derecognised MAT credit of Rs21.8cr, hence current tax charge for Q4FY18 is after MAT credit
India sales grew by 12.1% yoy to Rs960.2cr. Company has continued to outperform the industry (grew by 11.1% in Q4FY18).
Company has maintained leading positions in established therapy areas of Anti-infective (rank 1), Gastro Intestinal (rank 3), Pain / Analgesic (rank 3).
In vitamins, Neuro/CNS, Cardiac and Anti-diabetic, Alkem continued to grow faster than industry and has gained market share in Q4FY18.
In derma, its rank has declined and has grown slightly slower than the industry in Q4FY18.
US sales for Q4FY18 grew by 40% yoy to Rs407.1cr.
Other international markets sales for Q4FY18 grew by 23.2% yoy to Rs Rs116.5cr.
R&D expenses for the quarter was at 7.4% of sales.
Company has filed a total of 108 ANDAs with the USFDA and has received 50 approvals to date. In Q4FY18 and FY18 the company filed 11 /19 ANDAs respectively.
Company has said they are satisfied with the growth of the company in a challenging year for the industry.
Alkem has sent its replies to the USFDA regarding form 483 at its Daman and St. Louis facilities.
Company has sent the monthly update on Daman plant (1/3rd of US sales, 50% of pending ANDAs) to the USFDA. Management has said that there are less than 6 repeat observations and Alkem has reasonable chance of coming out of this.
USFDA inspection at Baddi is due at any time.
Expects mid teen growth in the domestic business over capacity expansions, higher MR productivity, especially in chronic and addition of 1,000 people in its sales force.
US business margin performance has been weak due to pricing headwinds/API price hikes. No competition expected in Mycophenolate in FY19E and company expects high single digit ANDA approvals in FY19E.
The margins were low in the quarter due to higher contribution of low margin international business, reduction of net realization due to GST, and API price hikes.
In FY19E, management expects 0.5%-1% reduction in the gross margin but expects to plug this by cost reductions.
During the quarter, there was net Rs28cr write-off on the real estate, which is now valued at Rs225cr.
Management expects to maintain FY19E EBITDA margins around the level of FY18.
Capex for FY18 was Rs675cr and that for FY19E is expected to be Rs550cr-Rs600cr, while tax rate is expected to be 18-20% for FY19E.
Company has no buyback plans and it will continue to pay 20-25% of PAT as dividend.
Alkem Laboratories Ltd is currently trading at Rs. 1,976.80, down by 57.75 points or 2.84% from its previous closing of Rs. 2,034.55 on the BSE.
The scrip opened at Rs. 2,050 and has touched a high and low of Rs. 2,054.65 and Rs. 1,929.80 respectively. So far 1,14,368 (NSE+BSE) shares were traded on the counter. The stock is currently trading below its 200 DMA.
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