Buy Laurus Labs; target of Rs 505: Motilal Oswal

Motilal Oswal is bullish on Laurus Labs has recommended buy rating on the stock with a target price of Rs 505 in its research report dated July 25, 2024.

Broker Research

July 26, 2024 / 14:59 IST

BUY

26 Aug, 2025 12:21

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Motilal Oswal's research report on Laurus Labs

Laurus Labs (LAURUS) posted a weak 1QFY25 due to deviation in buying of ARV formulations and deferral of some orders in the other API segment. Lower raw material costs led to a sharp improvement in gross margin (450bp YoY/530bp QoQ), offsetting the adverse impact of lower revenue in 1Q. We cut our earnings estimates by 8% each for FY25/FY26 factoring in: a) lower off-take of ARV products, b) a gradual uptick in the CDMO segment, and c) a front-loading of opex related to expanded/new facilities. We value LAURUS at 31x 12M forward earnings to arrive at our TP of INR505. LAURUS continues to implement efforts towards the CDMO capex (chemical synthesis for human drugs/animal health/crop science). Considering that exhibit/validation batches are underway, we expect commercial batches to commence over the medium term. Accordingly, the operating leverage would improve with the scaling up of batches from 2HFY25. The customer funding to the formulation facility for higher off-take further provides confidence on its efficient manufacturing capabilities. Reiterate BUY.

Outlook

We cut our earnings estimates by 8% each for FY25/FY26 factoring in: a) lower off-take of ARV products, b) a gradual uptick in the CDMO segment, and c) a front-loading of opex related to expanded/new facilities. We value LAURUS at 31x 12M forward earnings to arrive at our TP of INR505.

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