ICICI Securities has maintained its BUY recommendation on Alkem Laboratories, raising the target price to Rs 6,400 following management’s strong vision for double-digit revenue growth and promising developments in both core and new ventures. The firm’s focus on chronic therapies, expansion into the lucrative medtech and CDMO segments, and resilient India business underpin this positive outlook, even as the company navigates margin pressures and regulatory headwinds.

Alkem Laboratories, buoyed by a decisive BUY from ICICI Securities, is poised for robust growth over the next three years. The brokerage underscores an impressive playbook—management targeting double-digit topline growth, strategic emphasis on chronic therapeutic areas, new US-based CDMO and Indian medtech expansion initiatives, and decisive acquisition moves. With a sharpened focus, the company projects a 10.6% CAGR in revenues through FY28 and an upward revision in EPS forecasts. Nonetheless, short-term margin and tax bumps from new ventures are largely priced in, making the current valuation attractive for patient investors. The report delivers granular targets, trading levels, peer comparisons, and a bullish conviction for Alkem’s multi-faceted transformation.

ICICI Securities Reaffirms BUY: Target Rs 6,400

ICICI Securities has reiterated its BUY rating on Alkem Laboratories, raising the target price from Rs 6,065 to Rs 6,400 based on 23x FY27E EV/EBITDA multiple, citing robust growth levers and expanding profitability. The stock currently trades around Rs 5,481, offering more than 16% potential upside for investors over the next 12 months. The research highlights management’s forecast for India business to outpace the market and sees valuation supported by sustainable profit expansion and resilient demand in both India and key international geographies.

Key Operating Levels and Investor Targets

- The revised target price is Rs 6,400, up from the prior Rs 6,065. - Medium-term operating margin is projected to expand by 200bps, reaching approximately 21.3% by FY28. - EBITDA margins are expected to climb annually by around 100bps, supported by raw material cost optimization and operating leverage. - The stock currently trades at 31.6x FY27E earnings, dropping to 27.3x FY28E, reflecting improved growth visibility.

India Business: Chronic Growth, Acute Resilience

- Chronic therapies are set to expand to 20% of Alkem’s portfolio from the current 17%, driven by diabetes, CNS, dermatology, respiratory, and urology. - Acute therapy (like anti-infectives) exposure has been reduced from 45% to 34% over the past year, positioning the franchise for higher-quality growth. - India business (68% of sales) is forecasted to clock a 9.2% CAGR through FY28.

Game-Changing New Ventures: US CDMO and Medtech

- Alkem’s subsidiary Enzene is building out a differentiated India-US model for contract development and manufacturing (CDMO) in biosimilars and biologics. Full-scale US commercial operations will start from Q3FY26, targeting EBITDA break-even within 12-18 months. - The acquisition of Bombay Ortho and a licensing deal with Exactech have established Alkem as a significant player in the Indian ortho-implants market. - Medtech business is expected to generate Rs 200 million revenue in FY26E, scaling up to Rs 2.5 billion over five years, with significant investments (Rs 20-30 billion) planned for further growth.

US and International Market Updates

- Despite recent headwinds in the US, growth is expected to rebound with new launches such as gEntresto. - The impressive US pipeline—boasting high-barrier oral solids, injectables, and peptides—should push US revenue CAGR to 7.1% through FY28. - Trade generics in India continue to deliver in line with the IPM, buttressing overall profitability.

Financial Performance: The Numbers That Matter

Below is a snapshot highlighting the financial trajectory, as detailed in the report:

Peer Valuation Analysis

Risks to Watch

- Further imposition of price controls on products could restrict upside. - Regulatory hiccups in US-focused manufacturing and a potential slowdown in trade generics might dampen near-term profitability. - Margin headwinds from new ventures and a sharply higher tax rate (35%+) from FY27 are already built into the investment thesis.

Bottomline: Capturing the Growth Runway

Alkem Laboratories is in the midst of a dynamic transformation, balancing legacy strengths with bold forays into innovation-led verticals. Investors have an actionable opportunity with a target of Rs 6,400, fortified by a compelling management vision and proven ability to adapt to market and regulatory shifts. The momentum in chronic therapies, medtech, and US biosimilars is hard to ignore, and the valuation leaves room for an enterprising accumulation for those with a medium-term horizon.