Alkem Shares Fall 3% After Q2 Results as MOFSL Retains Neutral Rating

Alkem’s Profit Decline Puts Stronger Sales Growth in Perspective

Revenue and EBITDA advanced, but higher depreciation and tax costs weighed on earnings as the brokerage sees FY27 as a consolidation year.

Sales growth did not translate into higher adjusted profit

Alkem’s revenue rose 13.8% year on year to ₹4,550 crore in Q2FY27, while earnings before interest, tax, depreciation and amortisation (EBITDA) increased 11.3% to ₹1,020 crore. Adjusted net profit moved in the opposite direction, declining 14.8% to ₹650 crore. The divergence highlights why investors are looking beyond headline sales growth to the costs and deductions affecting the bottom line.

The company attributed part of the profit pressure to higher depreciation and a high tax rate during the quarter. The reported figure also included an exceptional gain of ₹35 crore from recovery against an impaired investment. That gain is distinct from underlying operating performance, so investors may assess recurring earnings separately from this one-off contribution.

International markets offset softer pockets at home

Domestic formulations, Alkem’s largest business, grew 9.5% to ₹3,030 crore and accounted for 67% of revenue. International revenue advanced 22.3% to ₹1,450 crore. Within that business, US sales rose 2.4% to ₹780 crore, while other international markets climbed 58.2% to ₹670 crore, supported by stronger execution in Latin America.

The mix matters: rapid growth outside the US helped lift the international segment, but it did not mean every business line performed equally well. MOFSL said stronger-than-expected international performance was partly offset by subdued trade generics in India and lower biotech sales. The brokerage described overall revenue and EBITDA as marginally ahead of expectations, while adjusted earnings were slightly below its estimate.

A consolidation year leaves execution as the key test

MOFSL’s Neutral stance reflects its view that FY27 is a year of consolidation for Alkem. Newer businesses are going through a gestation period: operating costs are being incurred ahead of a meaningful revenue ramp-up. The brokerage also cited regulatory issues at Daman as a drag on overall financial performance.

This creates a timing question for investors. If biotech and med-tech scale up and operating leverage improves in the India business, earnings growth could revive in FY28, as MOFSL expects. But that outlook depends on execution; the current quarter’s growth figures alone do not establish when newer operations will reach scale or how quickly their costs will be absorbed.

The share-price response reflects mixed signals

Alkem shares fell as much as 3.05% intraday to ₹5,140 on Friday. At 11:17 AM, they were down 2.05% at ₹5,194, while the Nifty 50 was lower by 0.5% at 25,170.40. The weaker performance relative to the index came alongside a quarter that combined solid revenue growth with lower adjusted profit, leaving investors to weigh current earnings pressure against the potential for a later recovery.

MOFSL retained its Neutral rating and a target price of ₹5,890. That is the brokerage’s assessment, not a guaranteed outcome. For investors, the more useful markers will be whether domestic trade generics improve, newer businesses begin contributing revenue and the cost burden eases without further disruption from the Daman regulatory issues.

Key Highlights

• Q2FY27 revenue rose 13.8% year on year to ₹4,550 crore; EBITDA increased 11.3% to ₹1,020 crore.
• Adjusted net profit fell 14.8% to ₹650 crore, partly due to higher depreciation and a high tax rate.
• Domestic formulations grew 9.5%; international revenue rose 22.3%, with non-US markets leading growth.
• MOFSL cited subdued trade generics, lower biotech sales and Daman regulatory issues as offsets to stronger international performance.
• The brokerage retained its Neutral rating and ₹5,890 target price, while describing FY27 as a consolidation year.

Investor Note: Alkem’s quarter showed healthy sales momentum but weaker adjusted profit, making execution and earnings conversion central to the outlook. Investors should treat the brokerage target as an opinion and monitor whether the expected business scale-up and operating leverage become visible in subsequent results.