Khambatta Securities' research report on Lasa Supergenerics
With a focus on animal healthcare and competencies across animal and human pharma, Lasa Supergenerics (Lasa) is a niche play with a diversified capability. India is a leading producer and consumer of animal protein, presenting strong domestic opportunities for Indian vet pharma companies including Lasa. Increasing prevalence of zoonotic diseases will drive demand for veterinary API products globally. Increasing awareness about preventive animal healthcare and judicious use of antimicrobials in production animals will drive demand for animal vaccines. Backward integration and a flexible manufacturing setup enable Lasa to quickly switch between products without incurring major capex and generate cost advantages. The company’s R&D practice looks to develop products with the objective of building a pipeline while also enhancing existing processes.
We expect robust topline growth during FY21 in line with the solid 1Q FY21 performance, followed by normalized healthy growth in FY22. Operating leverage will drive margin expansion with incremental effect at the PAT level due to lower interest expense / debt, leading to solid gains in ROCE and ROE. Basis strong earnings growth forecast, the Lasa stock trades at very attractive forward P/E levels of 11.4x and 9.0x FY21E EPS and FY22E EPS, respectively. Valuing at 13.0x FY22E EPS, our target price of Rs 84 informs a BUY rating with an upside potential of 44%.
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