ALKEM Laboratories: Target Price Revised to Rs 5840 by Motilal Oswal

Alkem Laboratories Posts Strong 4QFY26 Performance

Alkem Laboratories, a leading pharmaceutical company, has delivered a better-than-expected financial performance in the fourth quarter of fiscal year 2026 (4QFY26). The company reported a 4% beat on revenue, a 6% beat on earnings before interest, taxes, depreciation, and amortization (EBITDA), and a 16% beat on profit after tax (PAT) for the quarter. This strong performance can be attributed to the company's traction in the exports segment and higher other income.

In terms of segment performance, Alkem Laboratories exhibited 100 basis points (bp) year-over-year (YoY) outperformance to the industry growth in the domestic formulation (DF) segment. The revival in acute therapies and sustained growth momentum in chronic therapies contributed to the company's better-than-industry growth. Additionally, the trade generics segment is gradually recovering, while the US business segment sustained its sales momentum due to new launches and increased volume off-take.

The company's non-US export segment also reported significant growth, with a 24% YoY increase in 4QFY26 and a 27% YoY increase in FY26. This broad-based growth across markets is expected to continue in fiscal year 2027 (FY27) and beyond, driven by the company's niche product launches.

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Earnings Estimate Revision

In light of the company's strong performance and growth prospects, Motilal Oswal has revised its earnings estimate for Alkem Laboratories. The revised estimates reflect a 3% increase in earnings for FY27 and a 5% increase in earnings for FY28. This revision takes into account several factors, including the limited competition product pipeline for the US market, enhanced efforts to benefit from Semaglutide opportunities, and a reduction in the effective tax rate estimate.

Valuation and Recommendation

Motilal Oswal values Alkem Laboratories at 28 times its 12-month forward earnings, arriving at a target price of INR5,840.

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