Reviews

In this edition, we have reviewed Alkem Laboratories and ITC Limited. We suggest our reader-investors to HOLD in Alkem Laboratories and ITC Limited

We had recommended Alkem Laboratories in Volume 36, Issue No. 3, dated January 4 to January 17, 2020, under the ‘Choice Scrip’ segment. The recommended price for the stock was Rs2,925.35 and it was recommended on the basis of predicted recovery in acute therapies which would benefit the company, which bears a dominant position in this segment. Alkem Laboratories Limited is an Indian multinational pharmaceutical company headquartered in Mumbai that manufactures and sells pharmaceutical generics, formulations and nutraceuticals in India and globally.

The financial performance of the company indicates that on a consolidated quarterly basis the net sales and other operating income was Rs2,192.16 crore in Q4FY21 as compared to Rs2,048.99 crore in Q4FY20, a rise of 6.99 per cent. The operating profit rose by 2.08 per cent from Rs330.50 crore in Q4FY20 to Rs337.38 crore in Q4FY21. The net profit improved by 30.11 per cent in the quarter at Rs249.22 crore in Q4FY21 as compared to net profit of Rs191.54 crore in Q4FY20. On the annual front, the net sales and operating income rose by 6.24 per cent from Rs8,344.36 crore in FY20 to Rs8,865.01 crore in FY21. The operating profit rose by 37.9 per cent in FY21 as compared to FY20.

The net profit on an annual basis surged 40.76 per cent at Rs1,149.31 crore in FY21 as compared to Rs1,617.77 crore in FY20. Recently, the company has announced the launch of Perampil (Perampanel) tablets of 2 mg, 4 mg and 6 mg to make the treatment of epilepsy easier for patients and healthcare providers. The company’s secondary sales witnessed good recovery in the second half of the financial year compared to YoY decline in the first half. Also, during the quarter, the company overtook the market in the therapy areas of anti-infectives, pain management, vitamins, minerals, nutrients, neurological, CNS, cardiac and anti-diabetes. Hence, we recommend HOLD.

We had recommended ITC Limited in Volume 36, Issue No. 2, dated December 22, 2020 to January 3, 2021, under the ‘Cover Story’ segment. The recommended price for the stock was Rs213.4. We had recommended the stock on the basis of expected positive growth in the sector. ITC Limited has a diversified presence across industries such as cigarettes, FMCG, hotels, packaging, paperboards and specialty papers and agribusiness. The company has a total of 13 businesses in five segments. Taking into consideration the financial performance of the company, on a consolidated quarterly basis the net sales and other operating income was Rs15,404.37 crore in Q4FY21 as compared to Rs12,560.64 crore in Q4FY20, a rise of 22.64 per cent.

The operating profit improved by 5.4 per cent from Rs5,171.38 crore in Q4FY20 to Rs5,450.61 crore in Q4FY21. The net profit declined by 2.79 per cent in the quarter which registered at Rs3,816.84 crore in Q4FY21 as compared to net profit of Rs3,926.46 crore in Q4FY20. On the annual front, the net sales and operating income rose by 3.43 per cent from Rs5,394.42 crore in FY20 to Rs6,969.40 crore in FY21. The operating profit squeezed by 10.17 per cent in FY21 as compared to FY20. The net profit on an annual basis dipped 14.08 per cent at Rs13,389.80 crore in FY21 as compared to Rs15,306.23 crore in FY20.

The company witnessed strong sequential recovery momentum in the second half of FY21. The FMCG segment posted a strong performance whereas progressive recovery was seen in cigarettes and hotels. ITC is constantly taking efforts to be well-equipped to respond to the evolving pandemic situation with agility. Expanding its products portfolio, ITC’s ‘Sunfeast’, one of India’s most preferred brands in biscuits and cakes, has launched another new-to-market biscuit experience with ‘Sunfeast All-Rounder’. Hence, having optimistic sentiments regarding the growth of the company, we recommend HOLD.

(Closing price as of July 06, 2021)