Nuvama Institutional Equities cut the target price on Alkem Laboratories by 3.5% to Rs 5,840 from Rs 6,053 as the brokerage house sees a slowdown in acute business. It retained its ‘Hold’ call on the stock. It also slashed the earnings per share estimates by 3% for FY26 and 2% for FY27. It further cut the return on equity estimate to 17% in FY27. 

The brokerage firm said that the company’s domestic business declined sequentially, which reflects a slowdown in the acute business. Adding, the impact of no price hike in the NLEM portfolio, which makes up 30% of domestic revenue. 

Alkem Laboratories’ domestic business in the third quarter of the current fiscal year dropped 4% sequentially to Rs 2,400 crore. However, it grew 6% year-on-year. The domestic business missed Nuvama’s estimates. 

Not just domestic business, but international business also faced some heat. The US exports contracted 7% YoY while the international exports contracted 14% YoY. However, the brokerage firm thinks that it may return to normal levels with growth in the domestic acute and US generics. 

“We note Alkem’s gross margin in 9MFY25 is attractive; however, this may not sustain in FY26E with growth in domestic acute and US generics business. We think cost optimisation is necessary to expand EBITDA margin,” said Nuvama in a research note. 

Further, it said that acquisitions have a small quantum as the company recently acquired Bombay Ortho and Adroit Biomed, which made a combined revenue of Rs 60 crore for FY24, 0.5% of consolidated revenue. “We note, that under new management, Alkem is making some hard decisions (divestment/M&A), even though the quantum is very small for now,” Nuvama said. 

Alkem Laboratories in Q3

The company’s consolidated net profit rose 6% YoY to Rs 641 crore from Rs 604 crore in Q3 FY24. Sequentially, profit fell almost 9% from 702 crore in the previous quarter of the same financial year. Its total income for the quarter stood at Rs 3,467 crore, an increase of 1.4% YoY from Rs 3,417.5 crore in the same period last year. On a quarter-on-quarter basis, revenue declined 2.3% from Rs 3,549 crore in Q2 FY25.

Alkem Laboratories Vs Nifty 50

The share price of Alkem Laboratories has risen 1.33% in the last five trading sessions, taking the closing price of February 07. It has fallen over 4% in the previous one month and 9..8% in the last six months. Alkem Laboratories’ share price neither moved up nor down in the past one year. 

To compare, the benchmark index, Nifty 50 has risen 0.96% in the last five trading sessions. The index has given a return of 0.55% in the last one month. It has fallen 3.23% in the past six months. The index has increased by 9% in the previous one year.