Reduce Laurus Labs; target of Rs 293: Sharekhan

Sharekhan's research report on Laurus Labs

Q2FY24 witnessed a sequential recovery but numbers were below our estimates on all fronts with sales missing our estimates by 11% to Rs 1224 crore, EBITDA missing our estimates by 24% to 188 crore and PAT missing our estimates by 54% to Rs 39 crore. Laurus sales were largely impacted by 69% decline in CDMO business owing to high base. Ex. of High base PO, CDMO sales grew by 18% y-o-y. A decline in CDMO business and higher other expenses led to EBITDA Margin of 15%, 269 bps below our estimates. The management continues to expect FY24E as a year of consolidation on account of higher orders executed in FY23 in the CDMO business resulting in lower product mix and impacting EBITDA margin. On account of lower visibility in CDMO sales, the management has lowered EBITDA guidance to 20% for FY24E (earlier guided 25% in FY25E).

Outlook

Stock trades at higher valuation of 113.93x/38.23x its FY24E/FY25E EPS hence we maintain Reduce with our earlier PT of Rs. 293.