Alkem Lab Q4 FY26 earnings call

Alkem Laboratories reported a landmark FY26, with EBITDA crossing INR30,000 million (INR3,000 crores), reflecting a 19.6% Y-o-Y growth. Total revenue from operations for FY26 stood at INR1,47,123 million, growing 13.5% Y-o-Y. The EBITDA margin expanded to 20.4% in FY26, up from 19.4% in FY25, showcasing improved business mix and cost discipline. Q4 FY26 also demonstrated robust growth, with revenue at INR36,033 million (up 14.6% Y-o-Y) and EBITDA at INR5,174 million (up 32.2% Y-o-Y), leading to a Q4 EBITDA margin of 14.4%.

The company emphasized its continued focus on chronic therapies and successful new product launches. A key highlight was the day-one launch of semaglutide in March 2026, which quickly garnered an approximately 11% unit market share. Management expects this to significantly propel overall chronic growth. The Medtech and biosimilar CDMO businesses are also identified as ongoing growth areas, with the Occlutech acquisition expected to close within 45-60 days, integrating into the Medtech segment.

Alkem's India business grew 8.8% Y-o-Y in Q4 FY26 (INR23,245 million) and 9.7% Y-o-Y for FY26 (INR98,514 million), outperforming the Indian Pharmaceutical Market (IPM) by 100-150 basis points. The acute segment grew 10% versus IPM's 7.7%, while the chronic segment grew 16.1% versus IPM's 13.6%. The company has strategically expanded its manpower, particularly in the chronic segment, which now contributes close to 22% of the branded generic business. Trade generic growth was lower at 4.3% annualized in FY26 due to sales cutoff issues and a focus on profitability, but better growth is expected next year.

International sales showed strong growth, with Q4 FY26 recording INR12,223 million, a 25.4% Y-o-Y increase. The US market is expected to achieve high single-digit growth on a dollar-to-dollar basis, with additional forex gains. ROW markets are projected for higher teen's growth. The biosimilar CDMO business (Enzene) in India is operating at breakeven to early double-digit EBITDA, while US operations are currently loss-making. Meaningful CDMO revenue, in the range of INR200-300 crores, is anticipated to take a couple of years.

The company's capital allocation strategy prioritizes the integration of Occlutech, with no further acquisitions planned for the next 12 months. R&D expenses for FY26 were INR6,173 million, representing 4.2% of total revenue, and are expected to remain in the 4-5% range in the coming year. The dividend policy aims for a 25-30% PAT payout. However, due to the transition to a new tax regime from April 2026, the effective tax rate will increase to 27-29% from the previous 35-38%, which will lead to a higher payout percentage for the same absolute dividend value.

While optimistic about sustaining momentum in FY27, Alkem acknowledges potential headwinds from the current geopolitical environment and evolving global supply chain dynamics, leading to increased logistics costs and pressure on API and packaging material prices. Management is proactively monitoring the situation and managing the supply chain. The company has revised its margin guidance, stating that maintaining FY26 margins (20-21%) is the current best-case scenario, moving away from the previous target of 100 basis points annual improvement, due to these external cost pressures.

Dr. Vikas Gupta, the Chief Executive Officer, will be proceeding from Alkem. The company has initiated a search for a new CEO, engaging with top global headhunters, and expects the position to be filled in a few months. Management assured that business operations will continue smoothly, with promoters remaining actively involved. The structure for group businesses like Occlutech and Enzene, reporting to promoters or the MD, will remain unchanged.