Alkem Laboratories, a pharmaceutical firm has come out with initial public offer (IPO) to raise funds in the range of Rs 13 billion to Rs 13.5 billion to fund its expansion plans. The issue opens on December 8 and closes on December 10. The company has priced its public issue in the range of Rs 1,020 to Rs 1,050 a share. The face value of shares is Rs 2 each. It has put up 298,913 equity shares on offer under this public issue.
Brokerage firms Reliance Securities and SMC Global Securities have recommended 'Subscribe' to IPO of Alkem Laboratories.
Commenting on the investment rationale, Reliance Securities, said, ''Alkem has set forth an ambitious target of doubling its US contribution in the next 5 years. Today, US contributes a quarter of the overall revenue. Alkem is definitely entering late into chronic and lifestyle therapies but its experience of brand-building and a large prescriber base should come in handy. At a price band of Rs 1,020-1,050, Alkem is valued at 15.7/16.2x FY18E EPS, (as per our back of the envelope calculations) which we feel is fairly valued given its operational scale. We recommend Subscribe to the issue.''
Meanwhile, SMC Global Securities, said, ''At an upper price band of Rs 1050, the stock is trading at P/E of 14.31x on EPS of 73.36 (annualized 6 month EPS of 36.68) and at a lower price band of 1020 P/E multiple is 13.90. The fundamentals of the company look sound. With its increasing clientele, expanding capacities, valuation of the company looks good for subscribing the issue for long term. Hence we recommend Subscribe to the issue.''
On the other hand, Angel Broking, said, ''The company is comparable only to mid-cap companies like IPCA Laboratories (IPCA) in terms of size and profitability. On an average, the company's other income accounts for around approx 30-35% of PBT, while tax as % of PBT has been at 5% levels over the years. Thus, on a like to-like basis IPCA has a more superior business quality and we therefore believe that Alkem should trade at a discount to companies like IPCA Labs. We believe that the valuation leaves little scope for further appreciation in the stock price in the near term. Hence, we recommend an Avoid on the issue.''
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