Laurus Labs Q2 Review: Healthy Momentum In CDMO, FDF; Earnings Upcycle Intact — Motilal Oswal Maintains 'Buy'

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Motilal Oswal Report

Laurus Lab Ltd. delivered yet another better-than-expected quarter with a 6%/18%/38% beat on revenue/Ebitda/PAT. Higher formulation sales (finished dosage form; backed by robust antiretroviral revenue), a superior mix in the contract development manufacturing organisation segment, and improving operating leverage led to a strong Q2 FY26 performance.

Along with improving traction in the human health CDMO segment, the company has invested in manufacturing assets for the animal health and crop science aspects of the CDMO segment. In fact, the validation batches for certain products in the animal health segment are ongoing, with scale-up likely from FY27.

The non-ARV formulation sales have witnessed a healthy scale-up QoQ, fueled by newer introductions and higher off-take of existing products. 

Laurus Labs has shown encouraging performance in the ARV segment, led by higher volumes of products sold during the quarter.

We raise our earnings estimates by 11%/10%/6% for FY26/FY27/FY28, factoring in-

1. improved ARV prospects,

2. steady pick-up in CDMO projects, and

3. higher generics business backed by CMO opportunities.

We expect a 50% earnings CAGR over FY25-28 and value Laurus Labs at 58x 12M forward earnings to arrive at our target price of Rs 1,110. Reiterate Buy.

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