Laurus Labs Hits New Life High. Up 500%+ in One Year - Views on News from Equitymaster

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  • Jun 8, 2021 - Laurus Labs Hits New Life High. Up 500%+ in One Year

Laurus Labs Hits New Life High. Up 500%+ in One Year

Jun 8, 2021

Laurus Labs, one of the top-performing stocks of 2020, is back in the groove as it made a new life-high.

The new life-high at Rs 642, is also its new life-high.

The stock gained almost 358% in 2020 thereby, turning out to be one of the best multibaggers of 2020.

What is fueling the rally?

In the past three months, the stock of Laurus Labs has outperformed the market by surging 73% after the company's promoters released most of the pledged shares by selling their stake.

In comparison, the BSE Sensex was up 3.7% during the same period.

As of 31 March 2021, around 1.2% of the total promoters' holding were pledged, compared to 15.8% of the holding pledged at the end of December 2020 quarter, the shareholding pattern data shows.

On 4 March 2021, Dr Satyanarayana Chava, Founder Promoter, CEO and ED, and Nagarani Chava, one of the promoters of the company, had collectively sold a combined 7 m shares worth Rs 2.6 bn in the open market.

That apart, the management guided at a capex of Rs 15 bn over the next two years.

About 50%, 30% and 20% of capex is to be invested in the active pharmaceutical ingredients (API), finished dosage formulations (FDF) and contract development & manufacturing organization (CDMO) segments, respectively.

It is confident of sustaining a 30% EBITDA margin in the financial year 2022.

The debottlenecking exercise in FDF has been completed in March 2021 and the commercial benefit will accrue from first half of fiscal year (H1FY22) onwards.

The new manufacturing block will be commercialised by September 2021.

The company is adding capacity in non-ARV API (antiretroviral) products, which would be commercialised by FY22 end, aiding meaningful growth from FY23 onwards.

From the financial year 2023 onwards, growth in the synthesis business (11% of sales) would outpace growth in the API/FDF segment, based on active projects and capacity addition.

Many analysts and brokers remain positive on Laurus Labs on the back of its superior execution in the ARV segment, its strong chemistry skill set, which is driving the CDMO business, the addition of new molecules in the other API segment, cost efficiency aiding profitability, and addition of new levers in CDMO with Laurus Bio.

Laurus Labs is gaining due to its focus on growth areas such as APIs, FDFs, ingredients, and synthesis. The company is reaping rich dividends of its research and R&D (research and development) spends in the early stages.

Pharma stocks have underperformed in 2021 on a relative basis even though few pharma companies continued to shine, thus, continuing its positive trend from 2020.

Morepen Laboratories is one such pharma stock that has doubled in value this year while Divi's Laboratories is outperforming markets along with Laurus Labs.

Laurus Labs net profit zooms nearly three-fold in March quarter

Drug producer Laurus Labs reported a nearly three-fold jump in consolidated net profit to Rs 3 bn for the fourth quarter ended 31 March 2021 on the back of robust performance in all divisions.

The company had posted a net profit of Rs 1.1 bn for the same period of the previous year.

Consolidated revenue from operations of the company stood at Rs 14.1 bn for the quarter. It was Rs 8.4 bn for the same period a year ago.

For the financial year ended March 2021, the net profit of the company stood at Rs 9.8 bn while the revenue from operations came in at Rs 48.1 bn.

The board of directors has also approved the payment of an interim dividend of Re 0.8 per share.

Healthy revenue visibility on the back of robust order book

Partnership with global fund offers higher volume contracts with reasonable predictability in FDF tender business.

The company plans to have a healthy order book for financial year 2022 and beyond in FDF CMO business.

Robust growth in Other API segment to continue on the back of higher order book visibility from key therapeutic segments like chorionic villus sampling (CVS), anti-diabetic and proton pump inhibitors (PPIs).

Several new customers added with programs in various clinical phases.

The company incorporated a wholly owned subsidiary to give increased focus and eventually dedicated R&D and manufacturing for synthesis business.

Equitymaster's view on the pharma sector

We reached out to Tanushree Banerjee, Co-Head of Research at Equitymaster, and editor of the premium stock recommendation service StockSelect, for her view on the pharma sector.

Here's what she has to say...

  • The second Covid wave has given a new lease of life to pharma stocks. As the sector continues to invest in capacities for new drugs, the profitability will depend on the companies' ability to seek USFDA approval for the plants.

    Or their ability to tie up with MNC pharma for producing variants of their vaccine.

How the stock market reacted to Laurus Labs

Shares of Laurus Labs opened the day at Rs 574.5 on the BSE and Rs 575 on the NSE.

Laurus Labs share price closed at Rs 608.5 (up 6.4%) on the BSE and the NSE.

At its current price, it is trading at a P/E of 34.

The share touched its 52-week high of Rs 642 and 52-week low of Rs 92.9 on 8 June 2021 and 7 June 2020, respectively.

Over the last 30 days, the Laurus Labs share price is up 30.8%. Over the last one year, the company's share price is up 591%.

About Laurus Labs

Laurus Labs is an Indian pharma and biotech company headquartered in Hyderabad, with its manufacturing plants located at Visakhapatnam, Hyderabad, and Bengaluru.

Its focus areas include active pharma ingredients, finished dosage forms, synthesis, and biotechnology.

Laurus Labs manufacturing units have received one or more approvals from USFDA, WHO, NIP Hungary, KFDA, MHRA, TGA, and PMDA.

The company operates through its subsidiaries in Europe and United States and also offers its services in contract research, clinical research, and analytical research through its R&D centers.

Laurus Labs claims to be the 'world's largest third party API supplier for anti-retrovirals' and has one of the largest HI Potent API capacities in India.

For more details about the sector, you can have a look at the pharma sector report on our website.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

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