This stock rallied 60% in April but experts see another 20% upside

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26 Aug, 2025 12:21

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Laurus Labs share price has surged 60 percent since March 30, outperforming Nifty Pharma index (up 35 percent) as well as Nifty50 (up 19 percent).

Brokerages expect another 18-20 percent upside in the stock on the back of increased focus on pharma post-COVID-19, lack of participation in the previous bull run, strong earnings and expected in-licensing opportunity from Remdesivir.

"Given the strong topline growth prospects, visibility on earnings, healthy return ratios and low debt-equity ratio would support the multiple expansions. We maintain positive view on Laurus Labs and expect 18-20 percent potential upside," Sharekhan said.

Laurus reported a strong set of results for Q4 FY2020 with PAT at Rs 109.6 crore, growing 154 percent YoY, slightly ahead of Sharekhan's estimates.

According to the brokerage, revenues and earnings are expected to clock a sturdy 13 / 23 percent CAGR over FY20-FY22 aided by an expected impressive performance of the formulations business followed by the custom synthesis business and ARV-API's.

"Approval of Remdesivir, the patented anti-COVID-19 drug is under trials in US and if approved could potentially benefit Laurus by way of in-licensing opportunity and would result in further earnings upgrades," Sharekhan said.

The United States Food and Drug Administration (USFDA) on Saturday granted emergency use authorisation (EUA) for the investigational antiviral Remdesivir of Gilead Sciences, to treat COVID-19 patients.

"We will continue to work with partners across the globe to increase our supply of Remdesivir while advancing our ongoing clinical trials to supplement our understanding of the drug's profile. We are working to meet the needs of patients, their families and healthcare workers around the world with the greatest sense of urgency and responsibility," Daniel O’Day, Chairman and Chief Executive Officer of Gilead Sciences said.

Motilal Oswal also reiterated buy call on the stock and raised price target to Rs 615 (from Rs 520 earlier) as it expects a 23 percent earnings CAGR, primarily led by a 22 percent sales CAGR in the finished dosage forms (FDF)/Other API segment and a 31 percent sales CAGR in the Synthesis segment over FY20–22.

Laurus Labs also ended FY20 on a robust note, with 2.3x FY19 earnings and the highest ever annual PAT at Rs 260 crore. This is attributed to growth in the formulations (FDF)/synthesis business and better operating leverage.

Laurus is in the process of further building up capacity in both the FDF and API segments. This is to cater to future growth in the ARV-/ANDA-led formulations segment as well as in new molecules/market share in the API segment.

Accordingly, Motilal Oswal said it had raised EPS estimates by 12.7/5.2 percent for FY21/FY22 to factor in enhanced business prospects in the FDF/Synthesis/Other API segment.

In the Q4FY20, its revenue grew 32 percent YoY to Rs 840 crore (versus Motilal Oswal's estimates of Rs 730 crore). Revenue was led by FDF (32 percent sales), which surged to Rs 270 crore from Rs 28.2 crore YoY, primarily owing to traction in LMIC (low-and middle-income countries), North America, and the European Union.

Other API (which contributed 11 percent of sales) increased 33 percent YoY to Rs 98.9 crore and Synthesis revenue (18 percent of sales) grew 34 percent YoY to Rs 150 crore further supported growth.

However, its growth was impacted by ARV API (32 percent of sales; down 16 YoY) and Oncology API (7 percent of sales; down 17 percent YoY).

The gross margin improved 400 bps YoY to 50.1 percent owing to a superior product mix. Subsequently, the EBITDA margin, at 22.9 percent (versus Motilal Oswal's estimates of 20.6 percent), was up 520 bps YoY.

EBITDA came in at Rs 190 crore (versus Motilal Oswal's estimates Rs 150 crore), up 71 percent YoY. Profit increased around 2.5x YoY to Rs 110 crore (against Motilal Oswal's estimates of Rs 61.7 crore), led by robust sales growth, superior margins, and a lower tax rate.

Laurus expects capex to be over Rs 300 crore in FY21, spread over the FDF/API segment, and intends to spend Rs 60 crore (FY21) on de-bottlenecking and Rs 200-250 crore on brownfield expansions (FY21/22) in the formulations segment.

"Within FDF, the company guided for three ANDA approvals, two launches in Canada, and a better off-take in Europe, in addition to increased traction in the ARV segment," said Motilal Oswal.

Laurus has received a fixed allocation in TLD tenders, in addition to any ad hoc business for FY21. Approval for TLE 400/600 is expected in first half of FY21, the brokerage said.

The company has completed its lab work for Favipiravir and is in the process of obtaining a commercialization license. It also launched Hydroxychloroquine (HCQS), anti-malarial drug, in March 2020 through a partner.

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