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Motilal Oswal Report
Laurus Lab Ltd. delivered largely in-line operational performance for Q2 FY25. It witnessed an improving traction in the contract development manufacturing organisation business, with a 33%/44% YoY/QoQ jump in sales for Q2 FY25. However, this was offset by weak active pharma ingredient segment.
The commercialisation of CDMO contracts is expected to pick up in H2 FY25, driving sales as well as operating leverage.
We cut our FY25/FY26/FY27 estimates by 6%/8%/5% to factor in:
a reduced off-take of ARV formulations;
a gradual pick-up in abbreviated new drug application-led FDF business; and
a delay in onco-API sales.
Compared to a stable H1 FY25 performance on the revenue/Ebitda front, we expect 13%/68% YoY growth in revenue/Ebitda to Rs 30 billion/Rs 7 billion for H2 FY25.
The scale-up in sales from the CDMO segment and strong operating leverage are expected to drive strong performance for H2 FY25. Given the improving demand tailwind and increasing contribution expected from the CDMO segment over the next three-four years, we value Laurus Labs at 35 times 12 months forward earnings to arrive at our target price of Rs 530. Reiterate Buy.
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