Buy Laurus Labs; target of Rs 600: Sharekhan

Sharekhan's research report on Laurus Labs

Laurus Labs Limited’s (Laurus) Q2FY2023 performance was affected by weak ARV formulation (FDF) business performance due to lower volumes and adverse pricing in API/formulation, resulting in lower-than-expected revenue growth of 31% and EBIDTA margin standing flat at 28.5% due to unfavourable mix. Synthesis business was the highlight of the first half, with revenue growth of 3.7x; augmentation of R&D capacity and good demand will help in maintaining the momentum. Ability to weather pricing challenges and a slew of new launches will help ARV FDF business to quickly revive in the medium term. The company has lowered its revenue guidance to Rs. 65 bn from Rs. 72 bn earlier and expects EBIDTA margin to be at 30% in FY2023.

Outlook

The stock has corrected by ~14% post dismal Q2 performance and is currently trading at 23.2x/20.2x its FY2023E/FY2024E EPS. We retain Buy on Laurus with a revised PT of Rs. 600.

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Laurus Labs - 261022 - khan