Accumulate Laurus Labs; target of Rs 424: KR Choksey

KR Choksey recommended accumulate rating on Laurus Labs with a target price of Rs 424 in its research report dated January 29, 2024.

Broker Research

January 31, 2024 / 09:34 IST

Accumulate

26 Aug, 2025 12:21

Volume

Todays L/H

KR Choksey's research report on Laurus Labs

Laurus Labs’ revenue declined 22.6% Y-o-Y (-2.4% Q-o-Q) to Rs. 11,949 Mn (vs. our estimate of Rs. 12,669, miss of 5.7%) in Q3FY24. The generic API sales declined at 9.2% Y-o-Y (-8.7% Q-o-Q) to Rs. 5,740 Mn (vs. our estimate of Rs. 6,627 Mn, a miss 13.4%) due to high base effect as anticipated with the loss of Paxlovid opportunity in the current period, that took place during Q4FY22-Q3FY23. • Generic API largely declined due to 6.1% Y-o-Y (-5.7% Q-o-Q) decline in ARV APIs (61% of generic APIs, miss of 10.1%) and a 24.8% Y-o-Y (-0.4% Q-o-Q) decline in other APIs (24% of generic API, miss of 9.5%) revenue; partially offset by 13.5% Y-o-Y (-28.0% Q-o-Q) rise in Oncology API revenue (15% of generic APIs, miss of 52.0%). • Laurus Labs’ gross profits declined 21.3% Y-o-Y (+1.0% Q-o-Q) to Rs. 6,495 Mn (vs. our estimate of Rs. 6,335 Mn, beat of 2.5%) in Q3FY24, in line with the revenue decline. At the same time, Gross Profits Margins (GPMs) rose by 92 bps Y-o-Y (+181 bps Q-o-Q, a beat 436 bps) to 54.4% led by improved products mix favoring high value FDF segment in Q3FY24.

Outlook

The stock is trading at 129.9x/88.3x/26.8x our FY24E/FY25E/FY26 EPS. We apply a multiple of 30.0x (earlier 26.0x) on FY26E EPS of INR 14.1 (earlier Rs. 15.5) and arrive at a revised target price of INR 424, (earlier Rs. 403) implying an upside of 12.0% from the CMP. Accordingly, we maintain our “ACCUMULATE” rating on the shares of Laurus Labs Ltd. The increased multiple is to account for its high likelihood to get back to improved margins in FY25E itself as other APIs normalizes, and animal health and crop protection starts realizing ahead of our estimates.

For all recommendations report, click here