Alembic Pharma holds long-term promise

Alembic’s stock has almost doubled in the past year, making it the best performer in the ET Pharma Index.

Business revamp, entry into high-margin chronic therapy drugs in the domestic market, strong international show and reduction in debt have helped it improve performance in recent quarters. Operating margin has improved from 14% a year ago to nearly 17% in the June quarter.

To ramp up revenues, the company is banking on expansion of its manufacturing capacities which cater to the international business and its generic version of Pfizer’s drug Pristiq to gain traction in the US.

The rupee’s steep fall will also boost exports realisations in the near term. While Alembic has a high promoter holding of 74.13%, its non-institutional holding has risen steadily in the last three quarters. The stock is trading at fair valuations of 14.3 times its trailing four-quarter earnings and is valued at a market cap of 1.6 times its revenues.

It has corrected 15% in the last one month against flat movement of the ET Pharma Index, but Alembic’s business prospects hold promise for long-term investors.