Laurus Labs hits 2-yr high on hopes of healthy earnings; up 44% in 3 months

The board of directors of Laurus are scheduled to meet on January 24 to announce the financial results of the company for the quarter ended December 31, 2024.

Shares of Laurus Labs hit an over two-year high at Rs 619.50, gaining 3 per cent on the BSE in Tuesday’s intra-day trade on  hopes of earnings improvement in the coming quarters. The stock of the pharmaceutical company was trading at its highest level since April 2022. It has rallied 44 per cent in the past three months. The stock hit a record high of Rs 723.55 on August 12, 2021. 

 

The board of directors of Laurus will meet on January 24, 2025, inter-alia to consider and approve the un-audited financial results of the company for the quarter ended December 31, 2024 (Q3).

 

 

Since October 24, post Q2 results, the market price of Laurus has surged 41 per cent after the company said it expects healthy growth in FY'25, supported by scheduled project deliveries for late-phase clinical programs in Q4.

 

The company’s net debt has increased over last year due to continued Capex investments in expanding contract manufacturing organization (CMO) capability. However, with a better H2 performance, supported by facility ramp up, and margin improvements, the management expects reduction in net debt leverage by end of the year.

 

The demand for generic active pharmaceutical ingredients (API) is reduced due to increased competition, and the challenge is to effectively manage the huge upfront costs invested. The company has to ensure that new projects will pick up as planned and start generating revenue to improve operating leverage in the coming quarters. Analysts at KRChoksey Shares and Securities believe the performance will improve in H2FY25E as its newly established facilities will ramp up and additional contract development & manufacturing organizations (CDMO) orders will be delivered.

 

The management maintained its guidance of stable sales in FY25 vs. that in FY24. It also guided an earnings before interest, taxes, depreciation, and amortisation (EBITDA) margin of 20 per cent for FY25. Considering H1FY25 EBITDA margin of 14.5 per cent, the ask rate would be ~25 per cent for H2FY25. The CDMO business experienced improvement in Q2FY25 and is likely to scale up in the coming quarters given the contracts at hand, Motilal Oswal Financial Services had said in its Q2 result update.

 

India's domestic pharmaceutical market, fuelled by rising healthcare spending and an emerging middle class, is expected to grow. The penetration of health insurance and government initiatives like Ayushman Bharat (national health protection scheme) are pivotal, providing a broadened customer base for pharmaceutical products. Moreover, chronic disease prevalence such as diabetes and heart diseases are surging, further boosting demand for pharmaceuticals, Laurus said in its FY24 annual report.

 

The company anticipates robust growth in FY25, driven by leveraging its established capabilities to secure medium to long-term contracts and commercial opportunities in late-phase NCE projects. This positive outlook is further supported by the industry’s favourable environment. The company expects a ramp-up of growth projects and the commissioning of new assets, which will contribute significantly to our revenue streams.

 

The  company further said its capital expenditure strategy remains focused on prioritizing investments in high-value and growing market segments. This approach ensures that the company is well positioned to capitalise on emerging opportunities and sustain long-term growth, it added.