Hold Laurus Labs; target of Rs 368: Sharekhan

Sharekhan's research report on Laurus Labs

Q3FY2023 operating and net profitability was far below estimates. We attribute the deviation from estimates to an unfavorable product mix. Synthesis (CDMO) business is expected to slow down due to a high base effect. Laurus has lowered its EBITDA margin guidance to ~28% vs. guidance of ~ 30% given earlier for FY2023. We estimate that margins will be under pressure over the short-medium term. The stock has corrected by ~37% over the past one year.

Outlook

The stock trades at an expensive valuation of 22.7x/17.9x its revised FY2024E/FY2025E EPS estimates. We downgrade it to Hold from Buy with a revised PT of Rs. 368.

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