InvestorQ : Are you positive on Alkem Labs after the Q2 results for Sep-20 quarter?
Katherine Gonsalves made post

Are you positive on Alkem Labs after the Q2 results for Sep-20 quarter?

rhea Babu answered.
9 months ago

It looks like happy days for pharma stocks and Alkem was no different. The company reported 4.4% rise in the Sep-20 quarter sales at Rs.2,363 crore. Clearly, the pharma business across India managed to hold steady and remained largely immune to the vagaries of the COVID pandemic.

Let us turn to the operating performance of Alkem. For the Sep-20 quarter, operating profits were up by a whopping 33.8% at Rs.530 crore on the strength of higher sales revenues being able to absorb fixed costs effectively and better working capital management. As a result, the OPM expanded by nearly 500 bps to 22.44% in the Sep-20 quarter.

Finally, it is about the bottom line and that did not disappoint either. The net profits for the Sep-20 quarter was up by 26.54% to Rs.482 crore and this resulted in the net profit margins or the NPM of the company expanding from 16.81% to 20.38% in the second quarter.

Alkem has also been padding up its R&D spending which stood at Rs139 crore in the second quarter. This approximately translates into 5.9% of total sales, a good comparison with global benchmarks. R&D spend has improved from 5.4% last year, which is a positive trend.

Interestingly, the US business saw a sharp recovery. Alkem’s US business delivered 28% growth on a yoy basis in the September quarter. Alkem has also seen solid traction and recovery in the India business. It looks like COVID pressures are not just history but have propelled the company’s performance.