Hold Alembic Pharma; target of Rs 576: Anand Rathi

The Alembic Pharma’s Panelav API plant was recently (Jun’16) inspected by the US FDA, with zero observations. This follows its Mar’16 inspection of the company’s formulations plant. The consequent ANDA approvals implied minor observations. With the API plant now also inspected with zero observations, the regulatory risk for ANDAs pending approval is expected to be minimal.  At end-Q4 FY16, Alembic had 29 ANDAs pending approval; it guided to a ramp-up in filings over the next one to two years.  

At the CMP of Rs. 547, the stock trades at 25.2x FY17e EPS of Rs. 21.7 and 19x FY18e EPS of Rs. 28.8. On the high base of FY16, we expect a modest 4.3% CAGR over FY16-18 in sales, and a 13% compound annual decline in PAT. We have a Hold rating on it due to the limited potential from the current price. However, the US FDA inspection with zero observation is sentiment-positive.For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.