Reliance Securities has given a buy recommendation on Alkem Laboratories with a target price of Rs 2,050.
Shares of Alkem Laboratories traded at Rs 1,791.95 around 3:20 pm on 31 May, 2019. The brokerage has set a one-year horizon for the stock to hit the target price.
Alkem's revenue rose by 27 per cent year-on-year (YoY) to Rs 1,220 crore due to change in distribution policy, while adjusted revenue growth came in at low teens.
As per the brokerage, the company reported muted revenue growth of 8.5 per cent YoY in FY19 due to ban on select Fixed Dose Drug Combinations (FDCs), weak season (anti-infective and GI therapy market) and de-growth in trade generics business (tightening of credit terms).
"Looking ahead, we remain positive on the medium-to-long-term growth prospects of Alkem on the back of its focus on domestic business (secular growth)," said the brokerage.
However, the brokerage believes there will be pressure on Ebitda margin in FY20E and FY21E on account of robust growth in low-margin US business, higher R&D spend (up 27 per cent YoY in FY19), and large number of field force addition (2,000 added in last 2 years and 1,000 in FY20).
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