Laurus Labs shares advance 5% on strong growth outlook

Shares of Laurus Labs moved higher by 5 per cent to Rs 474.95 on the BSE in intra-day trade on Monday, erasing a 4.5 per cent fall witnessed in the past two trading days, on a strong growth outlook. The stock of the pharmaceutical company hit a record high of Rs 482.65 on April 29, the day on which the company announced its January-March quarter (Q4FY21) earnings.

The company’s Q4 revenues grew 68.3 per cent year-on-year (YoY) to Rs 1,412 crore with strong growth across segments. Earnings before interest, taxes, depreciation and amortization (Ebitda) margins improved 1,059 basis points (bps) to 33.4 per cent against 22.9 per cent in Q4FY20 due to better product mix and improved operating leverage. Subsequently, Ebitda grew 146 per cent YoY to Rs 472 crore. The profit after tax (PAT) was up 169 per cent YoY at Rs 297 crore, in line with a strong operational performance.

With the acquisition of a majority stake in Richcore Life Sciences, which is renamed Laurus Bio, Laurus Labs has entered into the high-growth biotechnology space. The acquisition gives us fermentation capabilities and helps us in diversification into newer areas, including recombinant products with a medium-to-long-term target of building vertically integrated biotech contract development and manufacturing organization, the company said. With sustained business opportunities and a strong order book for FY22, the management remains confident of achieving sustainable return ratios in FY2021-22 and beyond.

Laurus delivered in line performance in Q4FY21, with the highest-ever quarterly sales/EBITDA/PAT. Its capacity expansion program for formulation (FDF)/API remains on track. The company continues to make steady progress on building capability, as well as, capacity in the Synthesis/Biologics segment, which are additional growth levers for the next 4-5 years, analysts at Motilal Oswal Securities said in results update.

The brokerage firm raised the FY22E/FY23E EPS estimates by 6 per cent, factoring in benefit from debottlenecking exercise in FDF, capacity build-up in the non-ARV segment, better prospects in the Synthesis segment, and scale-up in the Enzymes/Biologics segment. Analysts at MOSL value Laurus at 18x 12-month forward earnings to arrive at a target price of Rs 550.

“Laurus is well poised to follow the success story of some leading CDMO players backed by strong chemistry and integrated model. Elsewhere, formulations are expected to grow amid ramp up and new launches (e.g. TLE400) in LMIC and launches in the US. Other APIs are expected to be driven by a strong order book and capacity addition. Besides continuous improvement in the financial performances, the company is evolving as a strong vertically integrated player with strong order book visibility, improving margin profile, strengthening return ratios and healthy FCF generation,” ICICI Securities said in result update. 

The brokerage firm maintained BUY rating with a target price of Rs 550 (versusvesus Rs 440 earlier) based on 20x of FY23E EPS of 27.4.