Hold Laurus Labs Ltd. For the Target Rs. 639 by Choice Broking Ltd
Laurus Labs beats revenue estimates with strong CDMO growth, but EBITDA and PAT fall short of street expectations
* Revenue grew 18.4% YoY and 15.6% QoQ to INR 14.2 Bn (vs. consensus estimate at INR 14.0 Bn).
* EBITDA increased by 57.2% YoY and 59.6% QoQ to INR 1,783 Mn, with margins expanding 497bps YoY and 556bps QoQ to 20.2% (in line with consensus estimate).
* APAT surged 298% YoY and 359% QoQ to INR 929 Mn, achieving a PAT margin of 6.6%.
CDMO business accelerates with robust pipeline, new assets, and capacity expansion: The company's CDMO business achieved strong revenue growth (89% YoY and 34% QoQ), driven by new assets and clinical project progress. With 90 active projects (70 in human health, 20 in animal health and crop protection), the small molecules pipeline remains robust. Capacity expansion is on track, including a new DS (Drug Substance) block at Unit-4, an animal health DS facility under construction, and a crop protection facility set for qualification by FY25-end. The scalability of these capacities is expected to enhance operating leverage, driving EBITDA margin expansion.
Laurus Bio expands with INR 1,200 Mn investment, boosting fermentation capacity and growth: Laurus Bio continues to experience strong customer pipeline building activity in its AOF segment and a diversified CDMO customer base. The company has secured an INR 1,200 Mn investment from Eight Roads to expand its commercial fermentation capacity by over 400 KL in Vizag, which is expected to become operational by the end of 2026. This expansion is anticipated to drive significant revenue growth and strengthen Laurus Bio’s position in the market. API recovery and strong formulation growth expected: Although the API segment has seen a declining trend, management anticipates recovery from FY26 as positive order bookings convert to sales. Meanwhile, the formulation segment's robust order book is expected to deliver sustained growth in the coming years. View and Valuation: We anticipate Laurus to benefit from the expansion in its CDMO and Bio segments, driving growth. While the API segment continues to face sluggishness, we expect normalization post FY26. Valuing the company at 37x FY27 EPS, we arrive at a target price of INR 639 and revise our rating to ‘HOLD’.
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SEBI Registration no.: INZ 000160131
