Laurus Labs Ltd. share price target

Media articles suggest growing consolidation in the e-pharmacy chain, i.e. Reliance-Netmeds and PharmEasy-Medlife.

1 August 2020 Laurus Labs (LAURUS) delivered all-time high quarterly PAT at INR1.7b. It is more than average of annual PAT over FY17-20. The company expects this to be sustainable on the back of diversified portfolio, increased customer base, addition of capacity for API/formulation and supported with better operating leverage. After a long wait, the efforts towards product development/building manufacturing base are reflected in the phenomenal financial performance. In fact, 1QFY21 redefines the earnings assessment over near to medium term. Our target PE remains unchanged and target price of INR1,215 at 17x 12M forward earnings factors just the earnings upgrade. Sustainability of growth momentum in FY22 can drive further re-rating. Reiterate Buy. LAURUS 1QFY21 revenues grew at a robust rate of 77% YoY to INR9.7b INR3.5b v/s INR1.1b YoY, Other API (14% of sales) revenue of INR1.3b v/s INR440m YoY, 37% YoY growth in CDMO (10% of sales), and 19% YoY growth in Anti-Viral API (35% of sales).

Laurus Labs reported a record Q1 beat with no major one-offs.

Laurus Labs reported a strong operational beat of 8%/20%/41% on sales/EBITDA/ PBT in Q4.

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Laurus Labs reported a consecutive beat with best-ever Q3 EBITDA, led by strong operating leverage in formulations and higher gross margins.

We recently hosted the management of Laurus Labs with investors. Overall, we found management's tone confident yet realistic.

ARV-API (-23% YoY) and Hep-C (-47% YoY), however, were weak. Product mix superior: Gross margin expanded 295bp YoY to 49.5%, led by the increased share of FDF sales. EBITDA margin too improved 385bp YoY to 19.3% (our estimate: 17%), led by a better product mix and lower opex (75bp YoY). EBITDA increased 51% YoY to INR1.4b (our estimate: INR1.1b). PAT doubled YoY to INR566m, driven by strong sales growth, superior margins and a lower tax rate. For 1HFY20, revenue/EBITDA/PAT were up 12%/34%/118% YoY to INR12.6b/INR2.3b/INR716m. Key concall highlights: (1) LAURUS has garnered mid-teen market share in...

Laurus Labs reported its best-ever EBITDA in Q2FY20 with a good topline beat, led by strong operating leverage in the formulation business and gross margin expansion.