Alkem Labs’ revenue grew 8.2 per cent CAGR over FY23-26 to ₹14,712 crore in FY26, while PAT recorded a CAGR of 32 per cent to ₹2,351 crore, aided by an improvement in the EBITDA margin from 14 per cent in FY23 to 20.4 per cent in FY26. Our September 2022 accumulate recommendation was based on the company’s increasing chronic share, growth in the US and other international markets, and scope for margin expansion. The stock has since returned 50 per cent.

Looking ahead, the company is expanding into medtech (medical devices) and CDMO to support longer-term growth. However, these businesses have a gestation period of two-three years, which is likely to keep earnings growth at a CAGR of 10-12 per cent in the period. At 26 times one-year forward earnings, the valuation appears reasonable. We, therefore, maintain a hold recommendation, with revenue traction in the new segments and the resulting margin improvement serving as key factors to monitor.

Base business drivers

Alkem derived 67 per cent of its FY26 revenue from domestic operations, including branded generics, biosimilars and trade generics. The company has also scaled its US operations, which account for 20 per cent of revenue, while the rest of the world contributes 12 per cent of FY26 revenue through generics.

In the domestic branded generics space, the company is led by the acute category, while chronic now accounts for 20-22 per cent of segment revenue. The chronic segment is less volatile and has higher margins than acute. The company is focusing on this segment by hiring new medical representatives, aiming to improve its share by 100 basis points every year. It also launched the injectable version of semaglutide (a day-one launch with a strong market share) in anti-diabetes and is working on the oral version, which should support growth.

The trade generics segment, in which the company has a leading presence, is now facing strong competition and higher raw material prices. Changes to the segment’s distribution structure and pricing in FY25-26 have slowed its growth. The company aims to improve profitability, and the reorganisation should subsequently support growth in this segment.

Price erosion in the US for the company’s portfolio has stabilised, and the upcoming launch of the high-value generic Tolvaptan for Kidney disease should drive mid-to-high single-digit growth in the US segment. Alkem has also delivered strong growth in international markets by expanding its geographic coverage and widening its portfolio, and this momentum is likely to continue.

Overall, the revival in trade generics, semaglutide, the focus on chronic therapies and growth in international markets should help the company sustain topline growth of 10-12 per cent over the next two years. Margins should improve by 100-150 basis points each year, supported by a better product mix (chronic), although volatile raw material prices arising from geopolitical risks may pose a challenge.

New segments

Alkem has acquired a 55-per cent stake in Swiss-based Occlutech Holdings for €99.4 million with the acquisition completed in July 2026. Occlutech has developed and commercialised structural heart products — Occulders for treating cardiac defects and avoiding heart failures and strokes. The target company also has a portfolio of devices in development including a product in trials and approval stage, expected to be commercialised in the US in FY28.

Alkem will have several levers to scale up the medtech business in the next three years. First, the launch of the second product, and the ramp-up of the first across semi-regulated and regulated markets should support strong revenue growth from around ₹600 crore reported in FY25. Second, the company operates at break-even EBITDA margins; with operational leverage and cost optimisation from Alkem handling back-end operations from India, the margins should improve significantly in the three years. Three, Alkem is manufacturing knee implants through its medtech subsidiary, which is also growing from a small base of ₹50 crore.

The company has also started CDMO operations from a US facility. The facility is focused on monoclonal antibodies, which are biological molecules primarily used in oncology and immunological therapies. The segment is currently supplying small clinical trial supplies and building its portfolio and client reach in the US. As CDMO operations have a longer gestation period compared to generics, the operational costs will impact profitability till the operations scale. The CDMO operations are expected to breakeven in the next two-three years and may partially offset the margin gains in the domestic business.

The company has a strong net cash position of ₹5,400 crore, as of March 2026, which along with cash flow from the base operations should support the acquisition payments and investments in the medtech and CDMO businesses. With regular growth from the base business and growth optionality from medtech and CDMO operations, investors can continue to hold the stock.

Published on September 26, 2026