Motilal Oswal's research report on Laurus Labs
Laurus Lab (LAURUS) delivered largely in-line operational performance for 2QFY25. It witnessed an improving traction in the CDMO business, with a 33%/44% YoY/QoQ jump in sales for 2QFY25. However, this was offset by weak API segment. The commercialization of CDMO contracts is expected to pick up in 2HFY25, driving sales as well as operating leverage. We cut our FY25/FY26/FY27 estimates by 6%/8%/5% to factor in: 1) a reduced off-take of ARV formulations; b) a gradual pick-up in ANDA-led FDF business; and c) a delay in onco-API sales. Compared to a stable 1HFY25 performance on the revenue/EBITDA front, we expect 13%/68% YoY growth in revenue/EBITDA to INR30b/INR7b for 2HFY25.
Outlook
The scale-up in sales from the CDMO segment and strong operating leverage are expected to drive strong performance for 2HFY25. Given the improving demand tailwind and increasing contribution expected from the CDMO segment over the next 3-4 years, we value LAURUS at 35x 12M forward earnings to arrive at our TP of INR530. Reiterate BUY.
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