ALKEM - Fundamental Analysis: Financial Health & Valuation
Back to ListFundamental Rating: 4.0
| Stock Code | ALKEM | Market Cap | 64,853 Cr. | Current Price | 5,424 ₹ | High / Low | 5,934 ₹ |
| Stock P/E | 29.3 | Book Value | 1,143 ₹ | Dividend Yield | 0.82 % | ROCE | 19.5 % |
| ROE | 19.9 % | Face Value | 2.00 ₹ | DMA 50 | 5,474 ₹ | DMA 200 | 5,452 ₹ |
| Chg in FII Hold | 0.18 % | Chg in DII Hold | -0.15 % | PAT Qtr | 654 Cr. | PAT Prev Qtr | 724 Cr. |
| RSI | 51.7 | MACD | 12.5 | Volume | 1,03,238 | Avg Vol 1Wk | 96,851 |
| Low price | 4,716 ₹ | High price | 5,934 ₹ | PEG Ratio | 2.10 | Debt to equity | 0.06 |
| 52w Index | 58.2 % | Qtr Profit Var | -3.35 % | EPS | 196 ₹ | Industry PE | 30.5 |
📊 Financial Overview:
ALKEM demonstrates strong fundamentals with quarterly PAT at ₹654 Cr., though slightly lower than the previous ₹724 Cr. ROCE at 19.5% and ROE at 19.9% highlight efficient capital utilization. Debt-to-equity is minimal at 0.06, ensuring financial stability. EPS stands at ₹196, reflecting robust profitability. Cash flows appear healthy given strong margins and low leverage.
💹 Valuation Indicators:
The stock trades at a P/E of 29.3, slightly below the industry average of 30.5, suggesting fair valuation. P/B ratio is ~4.7 (5424 ÷ 1143), which is elevated. PEG ratio of 2.10 indicates moderate overvaluation relative to growth prospects. Dividend yield of 0.82% adds investor appeal. Intrinsic value appears close to current price, making it fairly valued with limited upside.
🏢 Business Model & Advantage:
ALKEM operates in pharmaceuticals, benefiting from India’s healthcare demand and global generics market. Its competitive advantage lies in strong R&D, diversified product portfolio, and efficient capital use. Institutional sentiment is mixed, with FIIs increasing holdings (+0.18%) while DIIs reduced (-0.15%).
📈 Entry Zone:
Technically, support lies near ₹5,452 (200 DMA) and ₹5,474 (50 DMA). A favorable entry zone would be between ₹5,300–₹5,450 if the stock consolidates. Long-term investors may hold given strong fundamentals, though valuation suggests cautious accumulation.
Positive
- 📌 Strong ROCE (19.5%) and ROE (19.9%) indicate efficient capital use.
- 📌 Very low debt-to-equity (0.06) ensures financial stability.
- 📌 EPS of ₹196 reflects robust profitability.
- 📌 FII holdings increased (+0.18%), showing foreign investor confidence.
Limitation
- ⚠️ P/B ratio (~4.7) is elevated.
- ⚠️ Quarterly PAT declined from ₹724 Cr. to ₹654 Cr.
- ⚠️ DII holdings decreased (-0.15%).
- ⚠️ PEG ratio (2.10) suggests moderate overvaluation.
Company Negative News
- 📰 No major negative news reported, though recent profit decline raises caution.
Company Positive News
- 📰 Strong return ratios and minimal debt highlight financial health.
- 📰 FII inflows reflect confidence in long-term prospects.
Industry
- 🌐 Pharmaceutical industry is expanding with rising healthcare demand.
- 🌐 Industry P/E at 30.5 reflects growth potential, while ALKEM trades at fair valuation.
Conclusion
✅ ALKEM is financially strong with excellent return ratios, low debt, and robust profitability. Current valuations are fair relative to industry peers, though slightly stretched on P/B. Entry is advisable near support levels (₹5,300–₹5,450). Long-term holding is supported by strong fundamentals and sector growth, with monitoring of quarterly earnings essential.
For deeper insights, you could explore a peer comparison or a pharma sector outlook to complement this analysis.