IPO Note - Alkem Laboratories Ltd - Subscribe (IIFL)

Alkem Laboratories: Subscribe
Issue opens 08-Dec-15, Issue closes 10-Dec-15, Price band Rs1,020-1,050

Alkem Laboratories owns a bouquet of leadership brands built and sustained over a long time and has emerged as the fifth largest domestic pharma company. Promoted by Mr. Samprada Singh and Mr. Basudeo Singh, company is tied at 2nd spot with five brands in top 50. Alkem has cemented its presence in intensely competitive and largest therapeutic segment anti infective on back of strong brands like Clavam, Taxim O and Taxim. Though acute accounts for large share of domestic formulations, company is also focused on fast growing chronic therapies. It has taken initiatives to diversify from an India centric revenue base; exports account for 25% of revenues, scaled up mostly through acquisition of US-based Ascend Laboratories from ~12% in FY11. Domestic and export formulations have posted stellar 17.6% and 46.2% cagr over FY13-15 and we expect the momentum to continue with 16% and 29% cagr over FY15-18E respectively. At the upper price band, Alkem is available at ~12x FY18E ea! rnings, which is much cheaper as compared to peers like Alembic and Indoco. We recommend investors to Subscribe at the upper price to gain exposure into a robust domestic business with promising foray into chronic segment and US market. Any adverse US FDA action remains the key risk to our positive view on the offering.