✨ At a Glance
Alkem Laboratories quietly morphed from your neighborhood antibiotic dealer to a profit-churning pharma force. In the past 5 years, net profit jumped 2.2x, margins went from 14% to 19%, and the company now throws off Rs 2,200+ Cr in annual PAT. Yet, sales growth barely moved. Is this an efficiency miracle… or just tax acrobatics?
🧪 Part 1: From Augmentin to Asset-Light
Alkem always had the brand. You’ve probably popped one of their amoxycillin tabs. But FY20-FY25 saw a shift:
- Less dependence on acute therapies (like anti-infectives)
- Quiet entry into chronic segments (diabetes, neuro, cardiac)
- Overseas business (esp. US generics) started contributing >30%
FY25 Revenue Split:
- India: ~66%
- US: ~29%
- ROW: ~5%
No flashy buybacks. No CEO TED Talks. Just quietly improving profit every year.
📊 Part 2: 5-Year Financial Evolution
💸 Revenue & PAT
| Year | Revenue (₹ Cr) | Net Profit (₹ Cr) | EPS (₹) | OPM % |
|---|---|---|---|---|
| FY20 | 8,344 | 1,149 | 94.26 | 18% |
| FY21 | 8,865 | 1,618 | 132.57 | 22% |
| FY22 | 10,634 | 1,680 | 137.63 | 19% |
| FY23 | 11,599 | 1,007 | 82.31 | 14% |
| FY24 | 12,668 | 1,811 | 150.19 | 18% |
| FY25 | 12,965 | 2,215 | 181.11 | 19% |
- 5Y Sales CAGR: ~9%
- 5Y PAT CAGR: ~14%
- EPS CAGR: Even better — up 92% in 5 years
In pharma, sales growth is sexy. But margin growth? That’s real alpha.
🤔 Part 3: Margins, Mix, and Tax Jugaad
- Gross margins improved due to higher US generics and API efficiency
- Other income shot up in FY25 — from ₹186 Cr to ₹494 Cr
- Tax Rate Games: Effective tax has stayed under 15% for most years
That’s how EPS doubled despite 10% topline growth.
Also:
- OPM back to 19% in FY25 from slump in FY23
- ROCE consistently at 20%+ — clean, clinical, controlled
🏦 Part 4: Balance Sheet & Capex Discipline
- Borrowings: Reduced from ₹2,668 Cr (FY22) to ₹1,381 Cr (FY25)
- Reserves: Up from ₹8,614 Cr to ₹11,961 Cr
- Cash Flow from Ops: Strong ₹1,900+ Cr in FY25
- Inventory Days: 224 — a bit high, but manageable
Alkem doesn’t hoard gold. But it does hoard molecules 😅
🧹 Part 5: Shareholding Story
| Category | Jun ’22 | Mar ’25 |
|---|---|---|
| Promoter | 57.14% | 55.13% |
| FII | 5.67% | 9.40% |
| DII | 14.10% | 19.42% |
| Public | 23.09% | 16.05% |
- Promoters shaving off stake slowly
- Institutions lapping it up like vitamin syrup
Retail investors, meanwhile, are being prescribed exit pills.
🔰 Part 6: Valuation & FV Range
- Current EPS (FY25): ₹181
- P/E: 26.6x
- Sector P/E: 30–35x
- Alkem’s historical range: 22x (low) to 34x (peak)
Let’s bake in:
- FY26 EPS estimate: ₹205 (modest 13% growth)
- Target P/E band: 24x–30x
🎯 FV Range: ₹4,920 – ₹6,150
CMP = ₹4,813. Verdict: Near lower end. No margin of safety, but not overpriced.
📋 Part 7: Final Dose
Alkem isn’t flashy like Sun or newly IPO’d like Mankind. But:
- ✔ EPS has nearly doubled in 5 years
- ✔ Margins are stable and rising
- ✔ Cash flows are strong
- ✔ Institutions are accumulating
…and all this, without chasing every pharma trend or hyping up every USFDA approval.
It’s boring. It’s consistent. It’s profitable.
Sometimes, the best compounders are the ones that don’t shout.
📝 Written by Prashant | 🗕️ June 18, 2025
Tags: Alkem Labs, Pharma Stocks, EPS Growth, FY25 Results, NSE MidCap, Indian Pharma, Chronic vs Acute, Fair Value, Stock Recap
