Buy Laurus Labs; target of Rs 750: Choice Equity Broking

Choice Equity Broking's report on Laurus Labs

We have slightly revised our estimates upward by 4.0%/2.7% for FY26E/FY27E, given the improved performance in the CDMO segment. We believe we are more optimistic compared to the street on CDMO business opportunity. Our view hinges on the following: We believe the CDMO arm is not just additive but transformational, with 110 active projects in the pipeline contributing significantly to segment growth. This recent traction aligns with higher utilization at newly built manufacturing blocks and the initial scale-up of CDMO volumes. Management has also indicated further margin improvement as the CDMO segment scales up. In light of this, we have valued Laurus using both DCF (refer to Exhibit 1) and PE multiple to determine a fair price range.

Outlook

Our PE valuation is based on a multiple of 40x on FY27E EPS (up from 37x earlier, reflecting the strategic shift towards CDMO). By averaging both DCF and PE valuations, we arrive at a target price of INR 750 and upgrade our rating to BUY.