Laurus Labs Limited - Review

Formulations, API & Contract Manufacturing are the three categories.

APIs: 57% of the business is contributed through this segment. Of which 38% (of total business) is from Antiviral. 7% (of total business) is from Onco APIs and 12%(of total business) from Other APIs. Antiviral APIs - post WHO's move away from Efavirenz to Dolutegravir as 1st line regimen, Laurus had some significant impact. This may be offset by other APIs. But here this should be revenue neutral if not declining impact to the topline. Onco & Other APIs segment may not create a significant impact. On an overall 57% of base business should either remain where it is or decline.

Author: Ravi Sundaram

Contract Manufacturing: 14% of over all business. Q4 had some seasonality positively contributing to sales on a YOY basis this may continue to grow 15-20%, but Q1 should relatively underperform.

Formulations: 29% of business comes from this segment. Of which 80% of business is from sales to Lower Middle Income Countries. This is tender based business. 10% from US and another 10% from European business. In US, they have filed 26 ANDAs of which 2 have P4 and 7 FTFs. But these days you have significant competition even in para 4. Also in one of the concalls they have mentioned at 300cr run rate they were peaking out in terms of cap utilization. (~291cr in Q3). This Q1 they are debottlenecking and adding 20% capacity. Q1 possibly may not have this added capacity. So here too Q1 should be more or less the same as q3/q4.

Where is the growth going to come from?

1. API segment possibly not. Mgmt mentioned this in concall.

2. Contract Manufacturing - Maybe. Here they have good track record. But the base is low.

3. Formulations - Limited by capacity in near term. Longer term he should probably grow. But, interestingly they are able to sell everything they manufacture. But a number of times they talk about volumes, isn't pharma value based. Are they in niche space ? - Don't think so. Also 80% contribution from LMIC countries - can this revenue get rich multiples? It's an interesting thought.

4. Promoter holding is low and almost half is pledged.

Shares of Laurus Labs Ltd was last trading in BSE at Rs.512.35 as compared to the previous close of Rs. 514.95. The total number of shares traded during the day was 69673 in over 3833 trades.

The stock hit an intraday high of Rs. 522 and intraday low of 500. The net turnover during the day was Rs. 35653932.

Source : Equity Bulls

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