Buy Laurus Labs; target of Rs 440: Motilal Oswal

Motilal Oswal is bullish on Laurus Labs recommended buy rating on the stock with a target price of Rs 440 in its research report dated January 25, 2024.

Broker Research

January 29, 2024 / 19:47 IST

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Motilal Oswal's research report on Laurus Labs

Laurus Labs (LAURUS) reported another quarter of lower-than-expected earnings. There has been a delay in the ramp-up of sales from the CDMO and Non-ARV segments. LAURUS continued to incur operational costs on expanded capacity, which is yet to be utilized optimally. This has affected its performance adversely for 3QFY24. We cut our PAT estimates by 56%/30%/20% for FY24/FY25/FY26 factoring in: 1) a gradual pick-up in animal health contracts, 2) a delay in scale-up of Non-ARV formulation, and 3) a moderation in pricing of the Non-ARV API products. We value LAURUS at 25x 12M forward earnings to arrive at our TP of INR440. LAURUS would incur a cumulative capex of INR28b over FY22-24, across CDMO, Non-ARV formulation, and Non-ARV API segments. Further, it is undergoing a validation phase for products in the animal health segment, and capex for the crop science segment.

Outlook

Further, it is building a product pipeline in the non-ARV formulation segment. While the ramp-up is expected to be gradual, considering the historical asset-turn of 1.3x, the business potential can be INR36b over the next 3-4 years. Reiterate BUY.

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