Alkem's margin drops 7.80 points sequentially as costs rise
Revenue grew 14.62% year on year, but a higher tax rate and interest expense cut net profit 22.11%; the stock's five-day decline was below its usual post-results move.
Filed 28 May 2026, 20:06 IST · after market close · Alkem Laboratories Ltd (ALKEM)
Key takeaways
- Consolidated operating margin fell 7.80 percentage points sequentially to 14.36% as expenses grew 6.09% while revenue declined 3.57%.
- Revenue grew 14.62% year on year, but net profit fell 22.11% as the tax rate rose 22.00 percentage points and interest expense increased 89.58%.
- Alkem's 14.36% operating margin was 9.02 percentage points below the 23.38% median for 48 reported Healthcare peers.
Price around the results
Sequential margin reversal overwhelms revenue growth
Alkem Laboratories reported consolidated revenue of Rs 3,603.32 cr in Q4FY26, down 3.57% sequentially but up 14.62% year on year. The sequential margin reversal was sharp: revenue fell while expenses rose 6.09%, reducing operating margin by 7.80 percentage points. Operating margin nevertheless remained 1.91 percentage points above Q4FY25.
Tax and interest costs weakened profit conversion
Year-on-year operating profit grew 32.23%, as expenses grew slower than revenue, but net profit fell 22.11%. The tax rate rose 22.00 percentage points to 40.53%, while interest expense increased 89.58%, offsetting the operating improvement. Other income fell 55.60% year on year and represented 15.28% of pre-tax profit, so the prior year's profit also had greater support from non-operating income.
Two consecutive quarters of margin decline leave Alkem below peers
Operating margin has declined for two consecutive quarters, from 23.01% in Q2FY26 to 22.16% in Q3FY26 and 14.36% in Q4FY26. Alkem's margin was 9.02 percentage points below the 23.38% median among 48 Healthcare peers that had reported, placing it fourth from the bottom. The sequential fall also came with a 24.18-percentage-point increase in the tax rate and a 27.98% rise in interest expense.
Chronic growth and US filings support the business update
Management said the chronic segment grew 12.6% in Q4FY26, ahead of IPM growth of 12.5%, and that Alkem outperformed IPM in seven focused therapies. The company said it filed five ANDAs and received four approvals for the US market during the quarter. Management also said the company launched 11 products during FY26.
Initial market rise gave way to a smaller-than-usual decline
After the results, the stock gained 0.85% on the first day but was down 3.67% by the fifth day. That five-day move was smaller than the 6.00% median absolute move across its last eight results reactions, when the stock fell after seven of eight results.
Q4FY26 at a glance
Consolidated figures as filed with NSE — cross-checked against an independent source.
| Line item | Q4FY26 | Q3FY26 | QoQ | YoY |
|---|---|---|---|---|
| Revenue | ₹3,603 cr | ₹3,737 cr | -3.57% | +14.62% |
| Other income | ₹65 cr | ₹90 cr | -28.15% | -55.60% |
| Expenses | ₹3,086 cr | ₹2,909 cr | +6.09% | +12.12% |
| Operating profit | ₹517 cr | ₹828 cr | -37.51% | +32.23% |
| Operating margin (%) | 14.36% | 22.16% | — | — |
| Interest | ₹54 cr | ₹42 cr | +27.98% | +89.58% |
| Depreciation | ₹106 cr | ₹95 cr | +11.31% | -5.98% |
| Profit before tax | ₹422 cr | ₹781 cr | -45.91% | +6.71% |
| Tax | ₹171 cr | ₹128 cr | +34.07% | +133.42% |
| Net profit | ₹251 cr | ₹653 cr | -61.55% | -22.11% |
| EPS (₹) | ₹19.77 | ₹53.19 | -62.83% | -22.68% |
Operating margin of 14.36% compares with a Healthcare sector median of 23.38% across 48 peers that have reported Q4FY26.
How the stock reacted
| Window | Stock | vs NIFTY |
|---|---|---|
| Results day | +0.85% | +2.36% |
| Next session | -2.51% | — |
| 5 sessions | -3.67% | -1.41% |
| 15 sessions | -1.43% | — |
| 30 sessions | +2.12% | — |
Volume on the results session was 16.61× its 20-day average.
What management said
From the company’s own investor presentation. Each point is checked against the source document before it appears here.
This quarter
- The chronic segment grew 12.6% in Q4FY26, outperforming IPM growth of 12.5% by 10 basis points.
- In Q4FY26, the company filed five ANDAs and received four ANDA approvals for the US market.
New products
- The company launched 11 products during FY26.
Competition
- The company outperformed IPM in seven focused therapies, including anti-infectives, gastrointestinal and respiratory.
What to watch
- Whether operating margin recovers from 14.36% after the 7.80-percentage-point sequential decline.
- Whether expenses return to growing more slowly than revenue after rising 6.09% sequentially against a 3.57% revenue decline.
- Whether chronic-segment growth remains above the 12.5% IPM growth cited by management.