Alkem Laboratories Analysis

dividend

Pros

• Dividends paid are well covered by earnings (3.8x coverage).
• Dividends after 3 years are expected to be well covered by earnings (4.7x coverage).
• Alkem Laboratories's pays a higher dividend yield than the bottom 25% of dividend payers in India (0.76%).

Cons

• Dividend payments have increased, but Alkem Laboratories only paid a dividend in the past 4 years.
• Alkem Laboratories has been paying a dividend for less than 10 years and during this time payments have been volatile (annual drop of over 20%).
• Alkem Laboratories's dividend is below the markets top 25% of dividend payers in India (3.08%).

future

Pros

• Cash flow for Alkem Laboratories is expected to increase by more than 50% in 2 years time.
• Alkem Laboratories's earnings growth is expected to exceed the low risk savings rate of 7.2%.
• Alkem Laboratories's earnings are expected to exceed the low risk growth rate next year.
• Alkem Laboratories's earnings are expected to increase by more than the low risk growth rate in 3 years time.
• Performance (ROE) is expected to be above the current IN Pharmaceuticals industry average.
• An improvement in Alkem Laboratories's performance (ROE) is expected over the next 3 years.
• Alkem Laboratories's revenue growth is expected to exceed the India market average.

Cons

• Alkem Laboratories's earnings are expected to grow by 13.5% yearly, however this is not considered high growth (20% yearly).
• Alkem Laboratories's earnings growth is positive but not above the India market average.
• Alkem Laboratories's net income is expected to increase but not above the 50% threshold in 2 years time.
• Alkem Laboratories is not expected to efficiently use shareholders’ funds in the future (Return on Equity less than 20%).
• Alkem Laboratories's revenue is expected to increase but not above the 50% threshold in 2 years time.
• Alkem Laboratories's revenue is expected to grow by 10.5% yearly, however this is not considered high growth (20% yearly).

health

Pros

• Alkem Laboratories is able to meet its short term (1 year) commitments with its holdings of cash and other short term assets.
• Alkem Laboratories is profitable, therefore cash runway is not a concern.
• Alkem Laboratories is profitable, therefore cash runway is not a concern.
• Debt is well covered by operating cash flow (35.3%, greater than 20% of total debt).
• Debt is covered by short term assets, assets are 3.3x debt.
• Alkem Laboratories's cash and other short term assets cover its long term commitments.
• The level of debt compared to net worth has been reduced over the past 5 years (42.3% vs 26.3% today).
• Interest payments on debt are well covered by earnings (EBIT is 18.8x coverage).
• Alkem Laboratories's level of debt (26.3%) compared to net worth is satisfactory (less than 40%).

Cons

• High level of physical assets or inventory.

management

Pros

• The tenure for the Alkem Laboratories board of directors is about average.
• Dhananjay's remuneration is about average for companies of similar size in India.
• Dhananjay's compensation has been consistent with company performance over the past year, both up more than 20%.

Cons

past

Pros

• Alkem Laboratories's 1-year earnings growth exceeds its 5-year average (48.1% vs 9%)
• Alkem Laboratories's year on year earnings growth rate has been positive over the past 5 years.
• Alkem Laboratories used its assets more efficiently than the IN Pharmaceuticals industry average last year based on Return on Assets.
• Alkem Laboratories's earnings growth has exceeded the IN Pharmaceuticals industry average in the past year (48.1% vs 22.7%).

Cons

• Alkem Laboratories's use of capital deteriorated last year versus 3 years ago (Return on Capital Employed).
• Alkem Laboratories has not efficiently used shareholders’ funds last year (Return on Equity less than 20%).

value

Pros

• ALKEM outperformed the Pharmaceuticals industry which returned 26.7% over the past year.
• ALKEM outperformed the Market in India which returned -14.5% over the past year.

Cons

• Alkem Laboratories's share price is above the future cash flow value, it's not available at a moderate discount (< 20%).
• Alkem Laboratories's share price is above the future cash flow value, it's not available at a substantial discount (< 40%).
• Alkem Laboratories is overvalued based on assets compared to the IN Pharmaceuticals industry average.
• Alkem Laboratories is poor value based on expected growth next year.
• Alkem Laboratories is overvalued based on earnings compared to the IN Pharmaceuticals industry average.
• Alkem Laboratories is overvalued based on earnings compared to the India market.
• NSEI:ALKEM is down -3.2% underperforming the Pharmaceuticals industry which returned 6.8% over the past month.
• NSEI:ALKEM is down -3.2% underperforming the market in India which returned 8% over the past month.