ICICI Securities Initiates Coverage on Alkem Laboratories with Buy Recommendation, Targets Rs 6850

ICICI Securities Raises Target Price for Alkem Laboratories to INR 6,850

Alkem Laboratories (Alkem) posted a decent Q4FY26 performance, with India branded business growing by 10%. However, the reported growth of the India business was lower at 8.9% due to the restructuring of trade generics. The company's exports segment showed a strong performance, increasing by 25.4% year-over-year (YoY), driven by growth in the US, Rest of the World (RoW), and currency benefits.

For the upcoming fiscal year 2027 (FY27), Alkem's management has outlined a robust outlook, with double-digit revenue growth targeted in India and RoW, while the US market is expected to grow in single digits in terms of USD. The company's EBITDA margins are anticipated to remain between 20-21%, while the effective tax rate for FY27 is expected to be in the range of 27-28%, lower than the earlier estimated range of 35-37%. The biosimilar business under Enzene and Medtech is expected to continue its robust performance.

The acquisition of Occultech is expected to be completed within the next 45-60 days. In light of these developments, ICICI Securities has raised its earnings per share (EPS) estimates for FY27-28E by 20-21%, taking into account improved margins and a lower tax rate. The research firm has maintained a "BUY" rating for Alkem Laboratories and increased its target price to INR 6,850, based on an enterprise value-to-EBITDA multiple of 20x for FY28E.

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Revenue and Margin Projections

Alkem Laboratories' stock trades at a valuation of 25.8x FY27E earnings and 22x FY28E earnings, with an enterprise value-to-EBITDA multiple of 17.8x FY27E and 15.4x FY28E. Despite its current valuation, ICICI Securities maintains a "BUY" rating for the stock, given its robust growth prospects and improving margins.