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Alkem Labs: Domestic Markets Impacted by Price Cuts - Views on News from Equitymaster
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  • Jun 10, 2017 - Alkem Labs: Domestic Markets Impacted by Price Cuts

Alkem Labs: Domestic Markets Impacted by Price Cuts
Jun 10, 2017

Alkem has announced its 4QFY16 and full year results. The company has reported 9% YoY growth in net sales and 58.3% YoY growth in the net profits for the quarter. Here is our analysis of the results.

Performance summary
  • Net sales grew by 9% YoY during the quarter, backed by domestic and international segments. The Indian business grew by 7% YoY, amidst the challenging environment. The expansion of NLEM list, led to downward revision in some of the key brands. Over and above, WPI induced price cuts too impacted the certain revenues from key brands.
  • Company's sales growth was impacted mainly due to de-growth of 3.9% in the anti-infectives segment which contributes 39% to its domestic sales. Overall therapy growth for Q4 was at 4.7% as compared to industry growth of 6.6%
  • The US business grew by 19.4% for the quarter. In Q4 FY17, the company filed 13 ANDAs with the USFDA and received 5 approvals (including 1 tentative approval). As on 31st March 2017, the company has filed a total of 91 ANDAs (including 1 NDA) and has received 39 approvals (including 7 tentative approvals)
  • Other International markets grew by 1.6% Y-o-Y for the quarter. Its key markets of Australia, Chile and Kazakhstan recorded healthy growth. The company's strategy is to focus on key select markets rather than expanding over too many geographies.
  • Net profits were up by 58.3% YoY. The growth was largely attributable to lower tax outgo due to tax benefits for some of its plants. The company expects tax rates at MAT rates in FY2018 and a tax rate of 12-15% in FY19.

    Financial performance: A snapshot
    (Rs m) 4QFY16 4QFY17 Change FY16 FY17 Change
    Net sales 11,486 12,514 9.0% 50,479 58,525 15.9%
    Other operating income 0 0   0 0  
    Expenditure 9,927 11,021 11.0% 41,947 48,536 15.7%
    Operating profit (EBDITA) 1,559 1,493 -4.2% 8,533 9,989 17.1%
    EBDITA margin (%) 13.6% 11.9%   16.9% 17.1%  
    Other income 1,035.8 246.1 -76.2% 2,397 1,120 -53.3%
    Interest (net) 100.6 114.5 13.8% 712 452 -36.6%
    Depreciation 241.5 263.7 9.2% 933 1,012 8.4%
    Profit before tax 2,252 1,361 -39.6% 9,284 9,646 3.9%
    Exceptional Items 0 0        
    Tax 1,387 -9 -100.7% 1,762 600 -66.0%
    Minority Interest 0 0   0 0  
    Profit after tax/(loss) 865 1,370 58.3% 7,522 9,047 20.3%
    Net profit margin (%) 7.5% 10.9%   14.9% 15.5%  
    No. of shares (m) 120 120     119.6  
    Diluted earnings per share (Rs)         75.7  
    Price to earnings ratio (x)*         24.9  
    *based on trailing 12 months earnings
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