Shares of Alembic Pharmaceuticals Limited fell 8.02% to ₹721.25 on the NSE on May 18, 2026, shedding ₹62.85 from a previous close of ₹784.10, after the company’s Q4FY26 results missed Motilal Oswal’s estimates on every key metric — revenue, EBITDA, and PAT — by a material margin, and the brokerage responded by cutting FY27 and FY28 earnings estimates by 12% and 6% respectively while maintaining its Neutral rating with a target price of ₹725.
The reported headline numbers from Q4FY26 are not alarming in isolation. Consolidated net profit rose 29% year on year to ₹202.70 crore from ₹156.89 crore in Q4FY25. Consolidated revenue from operations grew 4.4% year on year to ₹1,847.72 crore from ₹1,769.64 crore. For full-year FY26, consolidated net profit was ₹663.86 crore versus ₹602.12 crore in FY25 — a 9% earnings growth year.
But the market is not reacting to the reported numbers. It is reacting to the magnitude of the miss against estimates and the forward guidance that accompanies it.
The estimate miss
Motilal Oswal had estimated Q4FY26 revenue of ₹1,890 crore, EBITDA of ₹320 crore, and adjusted PAT of ₹200 crore. Actual performance came in at revenue of ₹1,847.72 crore — a 2% miss — EBITDA of ₹230 crore — a 29% miss — and adjusted PAT of ₹120 crore — a 43% miss. A 43% PAT miss is not a rounding error. It reflects a fundamental divergence between the cost trajectory and what analysts were modelling.
The primary driver is R&D expenditure. R&D spending in Q4FY26 was ₹210 crore against ₹160 crore in Q4FY25 — a 31.25% year-on-year increase that management has guided to continue at ₹750-800 crore for the full year FY27, representing approximately 9% of expected revenues. Higher R&D, combined with elevated other operational costs, drove EBITDA margin contraction of 310 basis points year on year to 12.3% despite gross margin expansion of 120 basis points to 71.2%. Total expenses for Q4FY26 rose to ₹1,730.94 crore from ₹1,591.22 crore — an increase of 8.77% against revenue growth of 4.4%, producing the operating deleverage that crushed the margin.
The operational weaknesses
Domestic formulation performance in acute therapies was inferior in Q4FY26 — a segment that had delivered stable sales for the fourth consecutive year but showed weakness in the latest quarter, raising questions about whether the stability was genuine or inventory-supported. The specialty segment faced challenges through FY26. US sales growth was moderate at 7% year on year in constant currency terms despite a healthy pace of launches — indicating that new product approvals are not translating to proportionate revenue, likely due to pricing pressure and competitive dynamics in the US generics market.
The one bright spot management highlighted was the commercial launch of Pivya — Alembic’s entry into branded pharmaceuticals in the US — which marks a strategic shift toward higher-margin branded products. However, Motilal Oswal noted that the launch is recent and that prescription uptake and doctor reach need to be monitored before ascribing meaningful revenue credit to this initiative. Animal health and non-US international segments maintained robust growth momentum, partially offsetting the domestic and US generic headwinds.
What Motilal Oswal expects
The brokerage cut FY27 EPS estimates by 12% and FY28 estimates by 6%, factoring in slower growth in branded generics in the domestic formulation segment, higher product development spending, and lower operating leverage than previously modelled. Despite the cuts, Motilal Oswal maintained a constructive medium-term outlook — projecting EBITDA and PAT CAGR of 21% and 26% respectively over FY26-28 — premised on US business scale-up through increased launches, commercial success of Pivya in branded US pharma, and growth momentum in non-US and API segments.
Management guided FY27 US business growth of 10-15%, ROW business growth of over 15%, API business growth of approximately 10%, and India business growth in line with market — implying consolidated low double-digit revenue growth. EBITDA margin improvement is expected in FY27, with management reiterating an aspiration to reach approximately 20% EBITDA margins within two to three years from the current 12.3%.
The Neutral rating at ₹725 — effectively at the current price — reflects Motilal Oswal’s view that even after the earnings cut, the stock’s current valuation at 22.49x trailing earnings adequately prices in the upside from the US branded ramp and margin recovery. There is no margin of safety for a Buy call, and no deterioration severe enough for a Sell — leaving the stock in a holding pattern until the Pivya prescription ramp and Q1FY27 margin trajectory provide clearer signals.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Please consult a SEBI-registered financial advisor before making investment decisions.