Motilal Oswal: Alkem Laboratories’ Big Q1 Beat; Profits Ahead Of Expectations 

Motilal Oswal Report

Alkem Laboratories Ltd. exhibited strong traction in U.S. generics and significant savings on opex in Q1 FY21, which more than offset the YoY decline in domestic formulation (DF) sales, resulting in record high quarterly earnings.

The pandemic has showcased strong brand recall for Alkem’s products in the DF segment and superior execution in U.S. generics.

Q1 FY21 revenues grew approximately 7% YoY to Rs 19.8 billion (versus estimate Rs 18.2 billion).

International business reported sales growth of approximately 33% YoY to Rs 7.9 billion, led by revenue growth of (a) 38% YoY in the U.S. to Rs 6.7 billion (33% of sales), and (b) approximately 9% YoY in other International markets to Rs 1.2 billion (6% of sales).

Domestic formulation sales declined approximately 5.5% YoY to Rs 11.6 billion (58% of sales), due to Covid-19 related decline in patients visiting clinics. Gross margin expanded by approximately 140 basis point YoY to 63.4% due to better product mix.

Ebitda margin improved further by approximately 1,140 basis point YoY to 25.6% (versus estimate 15.7%), due to lower other costs (down 920 basis point as % of sales) and improved gross margins.

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