Laurus Labs shares plunge 14% in 3 days. Where are they headed?

Shares of Laurus Labs fell nearly 6 per cent in Tuesday's trade, taking their losing run to the third straight session. Laurus continues to grapple with high industry-wide channel inventory, slower demand and pricing pressure in antiretroviral (ARV) formulations and active pharmaceutical ingredients (APIs), said analysts, as they cut Laurus’ earnings estimates for FY23 and FY24 by 7-11 per cent.

The scrip fell 5.69 per cent to a low of Rs 452.45 on BSE. With this, the scrip has fallen 14.39 per cent in three trading sessions.

Motilal Oswal has cut its EPS estimates by 8 per cent for FY23 and 9 per cent for FY24 to factor in a steep price erosion in ARV products, lesser tender wins in ARV formulation, and increased overall operational cost.

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"We continue to value the stock at 23 times 12-month forward earnings to arrive at our target price of Rs 610," Motilal said while maintaining a ‘Buy’ on the stock.

Laurus Labs reported a 14 per cent year-on-year rise in consolidated net profit at Rs 233 crore in the September quarter compared with Rs 204 crore in the corresponding quarter last year. Revenue from operations rose to Rs 1,576 crore from Rs 1,203 crore in the year-ago quarter.

BOB Capital Markets has cut Laurus' target to Rs 540 from Rs 645 earlier, as it pared FY23 Ebitda estimates by 7 per cent and FY24 Ebitda estimates by 11 per cent. This brokerage has lowered its target EV/Ebitda for Laurus to 16 times against 17 times.

"Considering the steep decline in FDF performance, ARV pricing uncertainty, and the management’s revised top line guidance, we cut FY23-FY24

Ebitda estimates by 7-11 per cent and lower our target FY24E EV/Ebitda multiple to 16 times, in line with last 5-year average," the brokerage said.

Laurus Lab’s has seen its share price rising 7.1 times over the past three years, from Rs 68 level in October 2019 to Rs 478 levels in October 2022.

ICICIdirect continues to remain positive and retain its 'Buy' rating on the stock amid incremental contribution from custom synthesis with visible order-book.