Laurus Labs Ltd. share price target

TCS reported an in-line revenue performance in Q3FY19 with 1.8% QoQ CC (+12.1% YoY) revenue growth. Subcontracting costs increased 60bps QoQ amid onsite supply constraints, putting pressure on EBIT margins (90bps QoQ to 25.6% vs. +20bps expected). Management's double-digit revenue growth guidance for FY19 remains intact. TCS continues to be our preferred pick amongst IT large-caps we reiterate BUY and roll over to a Dec'19...

Initiate coverage with a BUY rating and TP of Rs 480 (18x Dec-20E EPS). Laurus Labs is a young, R&D-driven; company with strengths in complex chemistry and cost-efficient capabilities in API manufacturing. Laurus has grown at a scorching pace with 30% revenue, 32% EBITDA and 40% earnings CAGR over FY12-18. However, price hikes in a key raw material (FCME) and Rs 1bn operating spend on the nascent formulations business led to a nosedive in 1HFY19 (40% earnings drop).

5 November 2018 (LAURUS) revenue came in at INR5.8b (our est. Growth was led by Onco APIs (8% of sales; 22% YoY), other APIs (9% of sales; 28% YoY), Hep-C APIs (6% of sales; 24% YoY) and Synthesis (9% of sales; 58% YoY). However, it was offset by muted growth in ARV APIs (66% of sales, 2% YoY). Overall, the API segment (89% of sales) grew 7% YoY. 130bp YoY to 46.5% due to higher raw material prices. This adverse effect is expected to reduce in 3QFY19 as LAURUS has followed backward integration for such products. EBITDA margin contracted at a higher rate of 540bp YoY (- related operational expenses, (b) cost associated with transfer of profit sharing on 11 products from its partners, and (c) higher R&D; cost. As a result, other expenses increased to 18.5% (as percentage of sales) from 15% YoY and 16.8% QoQ. This coupled with increased depreciation and interest INR331m).

4 August 2018 revenue came in at INR5.3b (our estimate of INR5.5b), up 9.7% YoY. The ARV segment (69% of sales) grew 37% YoY and the Synthesis segment (10% of sales) grew 65% YoY, driving its overall revenue growth for the quarter. A decline of 69% YoY in the Hep-C business (5% of sales) and 45% YoY in other API (4% of sales), coupled with flat sales YoY of the Oncology segment (8% of sales) pulled down the overall revenue growth. This coupled with increased depreciation and interest cost led to a decline of 58% YoY in PAT to INR165m (our estimate of INR448m). We cut our EPS estimates by 23%/9% for FY19/FY20 to INR21/INR31 to factor in the increased raw material cost for 1HFY19 and delay in pick-up of the formulation business. Accordingly, we value LAURUS at 18x FY20E EPS of INR31 and arrive at a price target of INR552.

The USFDA has concluded inspection (was conducted from 26th February 2018 to 1st March 2018) at the company's Unit II (formulation) with zero observations. Notably, LAURUS also has the Establishment Inspection Report (EIR) in place for the previous inspection that was conducted 15 months earlier. The company has cleared nine inspections successfully at its different facilities, indicating its consistency in regulatory compliance. It should, thus, face minimal regulatory hurdles over the medium term. This is commendable given that peers are facing regulatory hurdles to the extent that either existing business is stopped and/or new approvals have been halted by the USFDA

We expect LAURUS to deliver 16.7% CAGR in sales to INR30b and 28% CAGR in PAT to INR4b by FY20, led by addition of formulations and healthy momentum in base API business. LAURUS is targeting 30 ANDA filings (six filed till date) over the next 2-3 years and accordingly expanding capacity from 1b units/year to 5b units/year. We expect its US sales to multiply from INR20m in FY17 to INR1.3b by FY20. It is also forward integrating in ARVs for further improvement in profitability. Consolidation of distributors in US has lowered scope of negotiation on product prices and regulatory hurdles have affected ongoing and/or future business of various pharma companies. We believe LAURUS is in a sweet spot to get the business in regulated market due to its cost efficiency and consistent compliance.

ICICI Securities Ltd | Retail Equity Research We met the management of Laurus Labs (Laurus) to understand the business model and its future plans. The company is a leading Indian active pharma ingredient (API) manufacturer with a leadership position in the therapeutic areas of anti-retroviral (ARVs or anti-AIDS- 64% of FY17 revenues) and Hepatitis C (13% of FY17 revenues). Apart from these, Laurus is also into oncology APIs (15 DMF filings), other therapeutic APIs, synthesis business and nutraceutical/cosmeceuticals ingredients...

Laurus is coming out with an Initial Public Offering (IPO) to raise Rs13.26-13.31bn from the equity market at a price band of Rs426-428 per equity share. The offer comprises of a fresh issue and an Offer for Sale. This issue will provide exit to its PE investors [offer for sale (OFS) for up to 24,107,440 shares by Private Equity shareholders Aptuit, Bluewater, FIL Capital Management, FIP (acting through its trustee FIL Capital Advisors)]. The Company shall not receive any proceeds from the Offer for Sale. The net...

Laurus labs Ltd (LLL) is a leading research and development (R&D) driven pharmaceutical company in India. Issue Open: Dec 06 - Dec 08 2016, Price Band: Rs. 426 ? 428

Established in 2005, Laurus is a leading API manufacturing company in India. Over the last five years, it has grown at 41% CAGR on top line, 48% CAGR on EBITDA and 58% on earnings. Strong R&D skills, focused approach, sticky relationships with clients and experienced leadership have been the key cornerstones of Laurus? success in the APIs.