Shares of Laurus Labs tanked 14 percent on January 27 as investors rushed to book profits off the stock, thereby snapping its two-day winning run. The stock gained nearly 6 percent in the past two sessions, buoyed by the company's better-than-expected Q3 results.
Profit booking also gained momentum following reports that the US had ordered a pause in foreign aid, potentially halting funding for the President's Emergency Plan for AIDS Relief (PEPFAR) as early as Monday. This move could disrupt the provision of anti-viral medications (ARVs) to millions.
The PEPFAR program, launched during the George W. Bush administration, has been credited with saving millions of lives globally, providing billions in funding to combat HIV and supplying ARVs to over 20 million people across 55 countries. Following his inauguration last week, President Donald Trump signed an executive order initiating a 90-day review of U.S. foreign aid programs. A memo from the US Agency for International Development, issued on Saturday, confirmed that the pause in foreign aid would involve a complete halt, with limited exceptions.
At 11.08 am, shares of Laurus Labs were trading at Rs 531.55 on the NSE.
Net profit for the drugmaker surged manifolds on year to Rs 92 crore, up from Rs 23 crore that it clocked in the same quarter last year. The net profit was also aided by a spike in other income to Rs 9.4 crore from Rs 2.4 crore in the year-ago period.
Revenue also grew by 18.5 percent on a year-on-year in the quarter gone by to Rs 1,415 crore, up from Rs 1,194 crore last fiscal. Even on a sequential basis, the topline rose 16 percent. However, the strongest upside trigger for the Street was an expansion in the company's EBITDA margin.
The drugmaker's EBITDA margin swelled up a massive 500 basis points on year to 20.2 percent in Q3. This marked the first time since the Q4 of FY23 that the company's EBITDA margin came above the 20 percent-mark.
Brokerage firm Goldman Sachs attributed Laurus Labs' margin improvement to better gross margins and operating leverage. Despite that, the brokerage retained its 'sell' call on the stock with a price target of Rs 475, opting to wait for a sustained improvement in the company's financials.
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Looking ahead, Laurus expects EBITDA margins to improve further on better asset utilisation and productivity gains, while continuing with new initiatives. On that account, the management has reiterated its 20 percent EBITDA margin guidance for FY25.
Meanwhile, even though the company did not provide quantitative guidance for topline growth for FY25, the management did mention that they have laid strong foundations for medium-term growth.
Motilal Oswal Financial Services also basked on the management's optimism, stating that green shoots of recovery were visible for the drugmaker. "Q3 to witness further improvement in financial performance for Laurus," the brokerage stated. MOFSL has a 'buy' call on the stock with a price target of Rs 720.
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