IPO Note - Alkem Laboratories Ltd - Subscribe (GEPL)

The company has expanded substantially in the international market over the past couple of years largely through inorganic expansion. This has resulted in margin contraction from 18.6% in FY12 to 12.8% in FY15. On valuation front company is available at 27.2x its FY15EPS at higher price band of Rs.1,050. However, company has reported strong H1FY16 result performance led by better product mix & consolidation of two subsidiaries namely Cachet and Indchemie with itself. The EBITDA margins also improve by 500bps from 12% in FY15 to 17% in H1FY16 & this was led by a falling raw material cost & better product mix. Hence, we believe H1FY16 operational performance to sustain in coming quarters & thus We recommend "SUBSCRIBE" to this IPO for longer run horizon.