Alembic (CMP: Rs.62/ TP: Rs.74/ Upside: 19%)
Alembic has announced de-merger of its Pharma business (comprises its domestic
formulation, international generic and API businesses) into a separate company
named Alembic Pharma.
With this, Alembic plans to insulate its relatively high-margin Pharma business
from the loss-making Pen-G business (API facility at Vadodara). Alembic also plans
to develop its 70 acre land asset going forward.
We believe that de-merger of the company into two - Alembic and Alembic
Pharma - is a long term positive as it unlocks value for both the businesses and
paves the way to rope in future investors. We recommend Buy on the stock valuing
Alembic on a SOTP basis with a Target Price of Rs74 implying an upside of 19%
from current levels.
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