Alkem Laboratories (ALKEM) Q4 16/17 earnings summary

Executive summary

• FY17 consolidated revenue rose 15.9% YoY to ₹58,525mn; domestic and US growth, market-share gains and new launches drove performance despite pricing and market headwinds.

• Gross margin expanded 90bps YoY and EBITDA margin 20bps, supported by product mix and operating efficiencies; R&D and manufacturing investment increased substantially.

• India remained the largest business at 73.2% of revenue; US contributed 20.6%, while other international markets contributed 6.2%.

Financial highlights

• Consolidated revenue from operations was ₹58,525mn versus ₹50,479.3mn in FY16; consolidated PAT rose 20.3% to ₹8,920.3mn and EPS increased to ₹74.61 from ₹62.02.

• Consolidated PBT was ₹9,646.3mn versus ₹9,284.1mn; profit before interest, depreciation and tax was ₹11,109.6mn versus ₹10,929.6mn.

• FY17 consolidated EBITDA was ₹9,990mn versus ₹8,533mn; gross margin improved 90bps YoY and EBITDA margin 20bps YoY.

• Consolidated operating cash flow was ₹3,698.3mn versus ₹7,258.3mn; investing cash outflow included ₹6,448.4mn of PPE purchases, while cash and equivalents ended at ₹1,666.3mn.

• Prior-year comparisons included ₹731.7mn gain on loss of control of Avenue Venture Capital Fund and ₹205mn from sale of IVF brands; FY16 also included an ₹834.1mn MAT-credit write-off.

Outlook and guidance

• FY18 was expected to be a transition year as trade partners adapted to GST; the domestic business aimed to grow ahead of the market.

• Domestic priorities include defending leadership in acute therapies, expanding chronic therapies, launching differentiated products, building OTC and improving field-force productivity.

• US growth priorities include accelerated R&D and ANDA filings, timely launches, and in-licensing or strategic partnerships amid pricing deflation, competition and regulatory change.

• Other international markets strategy centers on selected geographies, stronger local presence, differentiated products and partnerships or acquisitions.