Shares of Laurus Labs Ltd plunged 15 per cent in Monday's trade amid reports the US State Department issued a 'stop-work' order for all existing foreign assistance, which also impacted disbursements to program supplying HIV treatment worldwide. The less-than-expected profitability in Q3 also weighed on the stock, though analysts stayed positive on the stock
Choice Broking said that Laurus Labs beats revenue estimates with strong CDMO growth, but Ebitda and PAT fell short of Street expectations. The revenue for Laurus labs rose 18.4 per cent to Rs 1,420 crore, which was better than the consensus estimate at Rs 1,400 crore. Ebitda climbed 57.2 per cent while with margins expanded 497 basis points YoY to 20.2 per cent, in line with expectations. Adjusted PAT grew 298 per cent.
"We anticipate Laurus to benefit from the expansion in its CDMO and Bio segments, driving growth. While the API segment continues to face sluggishness, we expect normalisation post FY26. Valuing the company at 37 times FY27 EPS, we arrive at a target price of Rs 639 and revise our rating to ‘HOLD’," Choice Broking said.
The stock plunged 15.07 per cent to hit a low of Rs 510.60. For the quarter, Laurus Labs' CDMO business achieved revenue growth of 89 per cent YoY, driven by new assets and clinical project progress.
MOFSL said Laurus has seen strong improvement in its financial performance after six quarters of earnings decline. Over the past 2-3 years, Laurus has invested considerably in the CDMO segment to build capacities to cater to customers’ manufacturing requirements.
In fact, it has certain contracts in hand to be executed over the medium term. MOFSL said Laurus continued to invest in fermentation capacities to enhance its CDMO offerings, as it estimated a strong 71 per cent earnings CAGR over FY25-27 for the company. It reiterated its Buy on the stock with a target price of Rs 720.
"With 90 active projects (70 in human health, 20 in animal health and crop protection), the small molecules pipeline remains robust. Capacity expansion is on track, including a new DS (Drug Substance) block at Unit-4, an animal health DS facility under construction, and a crop protection facility set for qualification by FY25-end. The scalability of these capacities is expected to enhance operating leverage, driving Ebitda margin expansion," Choice Broking said.
Although the API segment has seen a declining trend, the management anticipated recovery from FY26 as positive order bookings convert to sales. The formulation segment's robust order book is expected to deliver sustained growth in the coming years, Choice Broking said.
"Laurus has secured an INR 1,200 Mn investment from Eight Roads to expand its commercial fermentation capacity by over 400 KL in Vizag, which is expected to become operational by the end of 2026. This expansion is anticipated to drive significant revenue growth and strengthen Laurus Bio’s position in the market," Choice Broking said.