Why This LIC Backed Large Cap Stock Is Crashing 7% Even As Profits Doubled In Q1

Shares of Alkem Laboratories slumped over 7% on Friday to hit an intraday low of ₹3,830.05.

What Happened: The pharma major’s net profit for the quarter ended June went up over 124% to ₹286.7 crore as compared to the ₹127.6 crore profit it reported in the same quarter last year. Revenue from operations jumped over 15% to ₹2,967.7 crore compared to ₹2,576.4 crore in the year-ago period.

The LIC-backed company‘s (LIC owns a 1.70% stake) EBITDA for the quarter came in at ₹389.2 crore with an EBITDA margin of 13.11%. Earnings per share for the quarter came in at ₹24.

The sentiments around the stock are dampened as several brokerages express a negative outlook. BofA Securities assigned an ‘Underperform' rating to the stock with a price target of Rs 3,500. The brokerage said that the June quarter was an in-line quarter for Alkem, but added that muted India growth and lower India growth guidance by the company are concerning.

HSBC also downgraded Alkem Labs to ‘hold' with a price target of ₹ 3,945. The firm also expressed concern about the slower growth in the Pharma company’s India business – which amounts to 65% of the company’s sales.

ICICI Securities also downgraded the stock’s rating to ‘reduce’ from ‘add’ with a price target of ₹3,700.

Price Action: Alkem Labs’ share price was down 6.89% to trade at ₹3,856 on Friday afternoon.

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