Alkem Laboratories Ltd Quarterly Results Q3 FY 25 stock analysis

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Sector Outlook: Positive

Steady quarterly performance; Cost initiatives to boost margin

Alkem’s revenue grew 1.5% compared to last year but dropped 1.2% from the previous quarter, reaching ₹33,743 million—higher than the market estimate of ₹32,950 million. In India, revenue grew 5.9% due to strong sales in key therapy areas like anti-diabetic, CNS, urology, and respiratory, though overall growth has been slower than the market in recent quarters. The company expects a 7% growth in India for FY25. In the U.S., revenue declined 7.3% due to supply chain issues and price cuts. EBITDA rose 7.3% YoY and 0.9% QoQ to ₹7,594 million, with margins improving to 22.5% thanks to better product mix and cost-saving efforts. Profit after tax was ₹6,408 million, up 6% YoY but down 8.7% QoQ, with a 19% PAT margin. The company increased R&D spending to ₹1,312 million (3.9% of sales), up from ₹1,111 million (3.3%) last year. Alkem remains a top five player in the Indian pharmaceutical market and a leader in the anti-infective segment

Key Concall Highlights

Domestic Business:

Despite a slowdown in acute therapy, Alkem performed slightly better than the market.
Management expects domestic business to grow in line with the market (~7% annually).
Growth in Q4 is expected to improve with new product launches.

Acute Therapy:

Grew by 5.9% YoY, slightly ahead of the acute market (5.7% growth).
Challenges: More competition from generics & government schemes like Jan Aushadhi.
Key brands like Pan, Uprise-D3, and A to Z gained market share.
Focus remains on innovation and pricing strategies to strengthen the portfolio.

Chronic Therapy:

Expanding rapidly, especially in diabetes and neurology.
Expected to grow faster than the overall market, supported by new therapies and specialty prescriptions.

Pan-D Brand Performance:

Fastest-growing brand among the top 12 in the Indian Pharma Market (IPM) in Q3FY25.
Achieved 15.5% YoY growth, significantly ahead of the market.
Reached its highest-ever market share, reinforcing Alkem’s leadership in the gastrointestinal segment.

Trade Generic Business:

Slowed down over the last two quarters due to seasonality and weak demand in Tier 2 & Tier 3 cities.
Instead of chasing sales, Alkem is focusing on improving margins, causing softer performance.

US Business:

Revenue declined slightly due to better product supply rather than new launches.
Sales expected to remain flat in Q4, with stabilization by year-end.
Price erosion remains a challenge, but volume growth and new launches in FY26 should help recovery.

Recent Acquisitions:

Bombay Ortho (₹147 Cr) – Expands orthopedic implants (hip & knee replacements). Adds a 2,000-unit/month production capacity, reducing costs & boosting market position.
Adroit (₹140 Cr) – Enters derma-cosmetology, a high-growth pharmaceutical segment.

Biosimilar CDMO Business (Enzene Biosciences):

Pune unit broke even before R&D costs.
Expected to grow 15%-20% next year.
Approval for expansion into international markets expected soon.

Valuation and Outlook

Alkem’s revenue remained flat in Q3FY25, with its domestic business slightly underperforming due to weak demand for acute therapies. However, the company expects better growth in Q4FY25, driven by new product launches and higher sales volumes. It is focusing on improving EBITDA margins through cost savings, better pricing, and optimizing its product portfolio. The domestic branded generics business is growing in line with the market, while chronic therapies are expanding steadily. In the US, despite price challenges, the business is stabilizing with better supply chain management and selective new product launches. Investments in biosimilars and MedTech, along with a strong cash position, support long-term growth. In the near term, Alkem is prioritizing margin improvements and portfolio expansion, while for the future, it expects steady growth from acute therapy recovery (FY26), chronic therapy expansion, trade generics, cost control, and a gradual US business recovery.