Laurus Labs extends fall for fourth straight day, dips 21% from record high

Shares of Laurus Labs were trading lower for the fourth straight day on Wednesday. The stock slipped 7 per cent to Rs 271 on the BSE in the intra-day trade. With today’s decline, the stock of the pharmaceutical company has slumped 21 per cent from its record high level of Rs 345, touched on October 30, 2020, in intra-day trade.

Laurus Labs was down on profit booking after the company reported a robust set of July-September quarter (Q2FY21) numbers. The company’s profit after tax (PAT) was up 328 per cent year-on-year (YoY) at Rs 242 crore for the quarter on the back of strong operational performance. Ebitda (earnings before interest, taxes, depreciation, and amortisation) margins improved 1,349 basis points to 32.8 per cent due to better product mix and improved operating leverage.

Revenues grew 60 per cent YoY to Rs 1,139 crore on the back of strong growth across segments mainly driven by a nearly three-fold YoY jump in formulations revenue to Rs 452 crore on the back of higher tender business from Low Middle-Income Countries (LMIC) and new launches. API (Active Pharmaceutical Ingredient) and CRAMS (contract research and manufacturing services) segments also posted strong growth of 22.4 per cent and 35 per cent YoY growth during the quarter.

For the first half (April-September) of the current financial year 2020-21, Laurus Labs profit after tax jumped 475 per cent YoY to Rs 414 crore, on the back of 67 per cent YoY growth in revenue at Rs 2,113 crore over the same period of the previous fiscal.

With improved demand visibility and strong profitability and debt situation, the management said the company continues to undertake larger green-field and brown-field capex for all the divisions and initiate new manufacturing units on a greenfield basis. The management is confident that the new capex will have a shorter payback period.

Given strong Q2FY21 earnings, most brokerage houses have recommended a ‘buy’ rating on Laurus Labs with a target price in the range of Rs 385 to Rs 400 per share. 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 free cash flow generation, they said.

Motilal Oswal Securities remains positive on Laurus Labs on the back of its superior execution in the anti-retroviral (ARV) segment, its strong chemistry skill set driving the Contract Development & Manufacturing Organization (CDMO) business,  the addition of new molecules in the other API segment, and cost efficiency aiding profitability.

At 02:19 pm, Laurus Labs was trading 4 per cent lower at Rs 280 on the BSE, as compared to a 0.68 per cent rise in the S&P BSE Sensex. A combined 8.2 million shares changed hands on the counter on the NSE and BSE. Despite a correction from its record high level, the stock has outperformed the market by surging 38 per cent, against a 7 per cent gain in the benchmark index in the past three months.