Contract development and manufacturing organisation (CDMO) services could hold the key to better prospects for Laurus Labs, analysts said after the company's fourth-quarter results.
“From 15.4 percent in FY2024, a significant revival in its EBITDA margin hereon hinges mainly on a much-improved CDMO performance,” analysts at Kotak Securities said.
Laurus Labs' net profit fell 26 percent to Rs 76 crore in the March quarter from Rs 103 crore a year earlier, the Hyderabad-based company reported on April 24. Revenue rose 4 percent to Rs 1,440 crore.
The management said a $100 million investment in CDMO services is ongoing. Supplies from animal health facilities will start in FY25, and the facility qualification for intermediate manufacturing in the crop protection segment is to be completed by end-FY25.
Laurus expects CDMO services to contribute one-third of sales in the next couple of years. In FY24, CDMO sales declined 57 percent to Rs 922 crore. This was due to a high base last year when a large purchase order was executed.
Laurus is currently validating two APIs (active pharmaceutical ingredients) and plans to file new drug applications for them soon.
The company aims to incorporate additional late-stage products and expand its project scope. However, there won't be significant sales contributions from potential new CDMO clients within the next year.
The company has been focusing on building capacity. It invested about Rs 2,600 crore over FY22-24 in CDMO (Rs 900 crore), API-CDMO combined (Rs 1,040 crore), and drug product/finished dosage form (Rs 650 crore).
Also read: Laurus Labs Q4 results: Net profit drops 25% to Rs 76 crore, revenue up 4%
“Although there's a gradual increase in macro tailwinds for its CDMO segment, the company is encountering delays in a few of its crucial CDMO projects," analysts at Kotak Securities said. "Barring the animal healthcare and later the crop science contracts in FY2026E, lack of visibility on any other commercial CDMO contracts is a worry.”
Analysts at Motilal Oswal cut their earnings estimate, foreseeing only a gradual pickup in the CDMO business. They also factored in a delay in abbreviated new drug approvals, and increased competition in the API segment.
Analysts at Jefferies cut the company's FY25/FY26 estimates by 15 percent and 3 percent, respectively, due to lower CDMO sales.
However, analysts at DAM Capital were optimistic about the company's prospects. They expect a sharp EBITDA/PAT growth from FY25 onwards as there would be pick-up in revenue/capacity utilisation, driven by higher margin non-anti retro viral/CDMO businesses.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
Find the best of Al News in one place, specially curated for you every weekend.
Stay on top of the latest tech trends and biggest startup news.
