Alembic Ltd: A Comprehensive Fundamental Analysis of a Diversified Small Cap Giant

Alembic Limited, a century-old diversified conglomerate, continues to stand strong in the ever-evolving business landscape of India. Founded in 1907, Alembic Ltd. has transformed itself from a pharmaceutical pioneer into a multifaceted entity, now venturing into real estate, pharmaceuticals, and power assets. With its rich history and steady evolution, Alembic Ltd has captured the interest of investors looking for stability and growth. This article delves into a comprehensive fundamental analysis of Alembic Ltd, evaluating its financial performance, key business segments, and potential as a strong investment opportunity in 2024.

Let’s take a closer look at the standalone balance sheet dashboard of the company and break down each component step by step to gain a comprehensive understanding.

Company’s Current Position and Historical Overview

Alembic Ltd, originally the flagship company of the Alembic Group, has diversified into three main business segments: Real Estate, API manufacturing, and Power Assets. The demerger of its pharmaceutical formulations business in 2010 led to the creation of Alembic Pharmaceuticals Ltd (APL), now the new flagship. Despite this transition, Alembic Ltd. remains a significant player, with a 28.41% stake in APL and a 19.01% stake in Paushak Limited.

Comprehensive Analysis of Alembic Ltd:

Sales, Profit, and Operating Margin Overview

The financial snapshot of Alembic Ltd from March 2018 to the predictions for March 2025 reveals several key insights:

• Sales Growth: Sales have been fairly stable over the years, with a significant jump predicted in March 2025, reaching Rs. 183.02 Cr.
• Net Profit: Net profit saw fluctuations, peaking in March 2025 with a prediction of Rs. 117.68 Cr.
• Operating Profit Margin (OPM): The OPM has shown an upward trend, expected to rise to an impressive 40.94% by March 2025, indicating better cost management and operational efficiency.

Net profit is high compared to operating profit due to company’s income from diversified portfolio and rental income from leased properties.

Earning Per Share (EPS) Analysis

• EPS has seen a gradual increase from Rs. 1.56 in March 2018 to a predicted Rs. 4.58 in March 2025, highlighting consistent value creation for shareholders.

Return on Equity (ROE)

• ROE reflects the company’s efficiency in generating profits from shareholders’ equity. After a dip in March 2021, Alembic Ltd’s ROE rebounded, with a predicted 12.42% in March 2025, showing improved profitability.

Asset Distribution

• The company’s asset distribution in FY24 is primarily in fixed assets (Rs. 366 Cr) and investments (Rs. 411 Cr). This strategic allocation towards tangible assets and investments reinforces the company’s solid financial footing.

Liability Distribution

• The liabilities are majorly composed of other liabilities (Rs. 128 Cr) and healthy reserves (Rs. 757 Cr). The relatively low equity capital (Rs. 51 Cr) and minor borrowings (Rs. 9 Cr) suggests that the company is leveraging its financial structure effectively to enhance returns.

Why Alembic Ltd Could Be a Good Buy

• Strong Real Estate Growth: With real estate contributing ~80% of the company’s revenue in FY24, driven by high demand and rising property prices, Alembic Ltd’s focus on upscale residential and commercial projects in Vadodara and Bengaluru could continue to yield robust returns.
• Solid Operating Margins: The consistent improvement in operating profit margins, predicted to reach 40.94% by March 2025, reflects the company’s strong operational management and cost-control measures.
• Strategic Asset Allocation: Alembic Ltd’s investment in fixed assets and other assets indicates a prudent approach to maintaining a balanced and growth-oriented portfolio.
• Earnings Potential: The steady rise in EPS and ROE points to the company’s commitment to enhancing shareholder value, making it an attractive investment option.
• Diversified Portfolio: The company’s presence across real estate, APIs, and power generation reduces risks and provides multiple revenue streams, further strengthening its investment appeal.

Now lets checkout the performance of the stock starting from 2018 to till date

As on 23/08/2024 the stock is trading at Rs 164.2, it may be bought at the current price with Stoploss below Rs 150 and near short term target could be Rs 200-Rs 220, In less then a year from now the stock may test Rs 300-Rs 350 level.

Conclusion

Alembic Ltd’s strategic diversification into real estate, APIs, and power generation, combined with its strong financial management, positions it as a promising investment opportunity. With an upward trend in operating profit margins, earnings per share, and a robust asset base, Alembic Ltd could be a smart addition to an investor’s portfolio in 2024. As the company continues to execute its growth strategy, particularly in the thriving real estate sector, it stands poised for sustained success.

This comprehensive analysis highlights why Alembic Ltd could be a lucrative buy, offering both stability and growth potential for investors. For more detailed insights and the latest updates, stay tuned to Equity Alchemy.