Laurus Labs hits fresh record high on expectation of strong earnings

Laurus Labs is one of the leading research-driven pharmaceutical manufacturing companies in India
Shares of Laurus Labs hit a fresh record high of Rs 1,387.50, up 3 per cent on the BSE on Thursday on expectation of strong earnings in July-September quarter (Q2FY21). The stock of the pharmaceutical company was trading higher for the ninth straight day, ralling 17 per cent during the period. In the past three months, it has surged 171 per cent, as against 16.6 per cent gain in the S&P BSE Sensex.

For April-June 2020 quarter (Q1FY21), Laurus Labs posted consolidated revenue of Rs 974 crore, up 77 per cent year-on-year (YoY) while earnings before interest, taxes, depreciation, and amortisation (EBITDA) stood at Rs 285 crore, up 288 per cent YoY. EBITDA margin came in at 29 per cent while net profit or profit after tax (PAT) zoomed 1,047 per cent YoY to Rs 172 crore.

Laurus Labs is one of the leading research-driven pharmaceutical manufacturing companies in India. The company has grown to become one of the leading manufacturers of API for anti-retroviral (ARV), oncology, cardiovascular, anti-diabetics, anti-asthma, and gastroenterology.

Leveraging on strong backward integration, Laurus has demonstrated commendable execution capability in this segment growing 165x from Rs 5 crore to Rs 825 crore in FY18-20 with majority growth stemming from tender driven opportunities via participation in Global fund, PEPFAR and various incountry African tenders.

Analysts at ICICI Securities expect the Contract Development & Manufacturing Organization (CDMO) segment to exhibit strong growth on the back of customer additions. Laurus is well poised to follow the success story of some leading CDMO players backed by strong chemistry and integrated model.

"Elsewhere, the 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. Our optimism is driven by strong order book visibility, improving margin profile, strengthening return ratios and healthy FCF generation," the brokerage firm said in company report. It assigns 'buy' rating on the stock with a target price of Rs 1,620 per share.

Meanwhile, the stock of Laurus Labs will turn ex-date for 1:5 stock split on September 29, 2020. The board of directors of the company has fixed September 30, 2020, as the record date for the sub-division of equity shares of the company from the existing face value of Rs 10 each to Rs 2 each. The company announced, on April 30, its stock split plan to make the stock more affordable for the small retail investors and increase liquidity.

At 11:55 am, Laurus Lab was trading 2 per cent higher at Rs 1,370 on the BSE, as compared to 0.71 per cent decline in the S&P BSE Sensex. A combined 711,000 equity shares had changed hands on the counter on the NSE and BSE till the time of writing of this report.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel