Alkem Labs Q4 Review: Jefferies Cuts Estimates, Flags Execution Risks

Alkem Laboratories Ltd. reported a fourth-quarter miss, primarily on lower margins, prompting Jefferies to lower the price target to Rs 4,460. The brokerage retained its 'underperform' rating, citing concerns around execution on new initiatives.

After an 18-month stretch of improving Ebitda margins, Alkem is now shifting focus to accelerating growth. It expects India sales to lead this charge, with overall revenue growth guided to be in high-single digits for fiscal 2026 and double-digit for fiscal 2027.

In the March-quarter, revenue rose 7% on an annual basis to Rs 3,104 crore, falling slightly below Jefferies' estimates. Ebitda at Rs 393 crore was 8% below expectations, while margins stood at 12.4%, down 125 basis points yearly. Profit after tax fell 9% yearly to Rs 308 crore, missing consensus estimates.

Jefferies notes US sales dropped 3% quarterly, while domestic sales grew 10% as compared to last year, albeit with slower growth in the trade generics segment. Higher R&D spends, complex product launches and upfront costs are expected to weigh on margins in fiscal 2026, though the company anticipates a benefit from these investments in fiscal 2027.

With valuation at 23 times the earnings per share value for fiscal 2027, Jefferies sees limited upside. It flags the need for strong execution on growth initiatives and awaits clarity on their impact.

• Revenue up 7.1% at Rs 3,144 crore versus Rs 2,936 crore.

• Ebitda down 2.7% at Rs 391 crore versus Rs 402 crore.

• Margin at 12.4% versus 13.7%.

• Net profit up 4.2% at Rs 306 crore versus Rs 294 crore.

• To pay final dividend of Rs 8 per share.