ALKEM - Investment Analysis: Buy Signal or Bull Trap?
Back to ListInvestment Rating: 4.0
| Stock Code | ALKEM | Market Cap | 67,446 Cr. | Current Price | 5,642 ₹ | High / Low | 5,934 ₹ |
| Stock P/E | 30.2 | Book Value | 1,143 ₹ | Dividend Yield | 0.80 % | ROCE | 19.5 % |
| ROE | 19.9 % | Face Value | 2.00 ₹ | DMA 50 | 5,656 ₹ | DMA 200 | 5,438 ₹ |
| Chg in FII Hold | 0.50 % | Chg in DII Hold | -0.39 % | PAT Qtr | 724 Cr. | PAT Prev Qtr | 610 Cr. |
| RSI | 48.2 | MACD | -6.34 | Volume | 79,440 | Avg Vol 1Wk | 1,06,635 |
| Low price | 4,492 ₹ | High price | 5,934 ₹ | PEG Ratio | 2.17 | Debt to equity | 0.06 |
| 52w Index | 79.8 % | Qtr Profit Var | 12.8 % | EPS | 204 ₹ | Industry PE | 29.1 |
📊 Analysis: ALKEM demonstrates strong fundamentals with ROE at 19.9% and ROCE at 19.5%, reflecting efficient capital usage. Debt-to-equity is very low at 0.06, ensuring financial stability. EPS of ₹204 supports profitability, and dividend yield of 0.80% adds modest income potential. The P/E of 30.2 is slightly above the industry average of 29.1, suggesting fair-to-premium valuation. The PEG ratio of 2.17 indicates moderate overvaluation relative to growth. Technicals show weakness: RSI at 48.2 (neutral), MACD negative (-6.34), and price hovering near DMA 50 and DMA 200, signaling consolidation. Quarterly PAT growth of 12.8% highlights earnings momentum, supporting long-term prospects.
💡 Entry Price Zone: Ideal accumulation range is between ₹5,300 – ₹5,500, closer to DMA support levels, offering better valuation comfort.
⏳ Exit / Holding Strategy: Long-term investors (3–5 years) can hold given strong ROE/ROCE and consistent profitability. Exit or partial profit booking should be considered near ₹5,900–₹6,000 resistance levels if valuations stretch further without earnings growth acceleration.
Positive ✅
- Strong ROE (19.9%) and ROCE (19.5%) highlight efficient capital use.
- Debt-to-equity of 0.06 ensures financial stability.
- EPS of ₹204 supports profitability.
- Quarterly PAT growth of 12.8% shows earnings momentum.
- FII holdings increased by 0.50%, reflecting foreign investor confidence.
Limitation ⚠️
- P/E of 30.2 is slightly above industry average (29.1).
- PEG ratio of 2.17 signals moderate overvaluation relative to growth.
- Dividend yield of 0.80% is modest.
- Weak technicals: MACD negative, RSI neutral, price near DMA levels.
- DII holdings decreased (-0.39%), showing reduced domestic institutional confidence.
Company Negative News 📉
- No major negative news reported, but technical weakness and modest dividend yield remain concerns.
Company Positive News 📈
- Quarterly profit growth (12.8%) highlights operational improvement.
- Strong fundamentals with high ROE and ROCE.
- 52-week index return of 79.8% shows strong past performance.
Industry 🌐
- Industry P/E at 29.1 indicates moderate valuation levels.
- Pharmaceutical sector benefits from long-term demand and global healthcare expansion.
Conclusion 📝
ALKEM is a fundamentally strong company with excellent ROE/ROCE, low debt, and consistent profitability. While valuations are slightly stretched and technicals weak, long-term investors can accumulate near ₹5,300–₹5,500 for better risk-reward. Existing holders should maintain a 3–5 year horizon, with partial profit booking near ₹5,900–₹6,000 resistance levels if earnings growth does not accelerate further.