EUR 120.00 For Business Accounts Only

MOSL: LAURUS LABS (Buy)-Formulation/Synthesis outshines; API underperforms

LAURUS LABS: Formulation/Synthesis outshines; API underperforms

(LAURUS IN, Mkt Cap USD4.6b, CMP INR641, TP INR800, 25% Upside, Buy)

 

Building of Non-ARV drivers/capacity on track

• Laurus Labs (LAURUS) 1QFY22 earnings missed our expectations. The robust performances in the Finished Dosage Formulations (FDF) and Synthesis segments were more than offset by a muted show in the Active Pharma Ingredients (API) segment. That said, in addition to having an established business in the Anti-Retroviral (ARV) segment, LAURUS is on track to build new levers for future growth in Contract Development and Manufacturing Operations (CDMO) and Non-ARV API/Formulation.
• We tweak our FY22E/FY23E EPS estimate, factoring in a) moderation in the API business, b) strong traction in Synthesis and FDF, and c) enhanced capacity in the Bio business. We continue to value LAURUS at 24x 12M forward earnings to arrive at TP of INR800. We remain positive on LAURUS on the back of a) the scale-up in Biologics as well as Synthesis CDMO, b) its product development/addition capacity in the Non-ARV segment, and c) a healthy order book for the Non-ARV API business. Reiterate BUY.

 

Superior product mix drives profitability as well as YoY earnings growth

• Revenue grew 31% YoY to INR12.8b (est. INR13.6b) in 1QFY22.
• The YoY growth in 1QFY22 was primarily supported by a) 95% YoY growth in Custom Synthesis (CS) to INR2b (15% of sales) and b) 48% YoY growth in Formulation sales to INR5.2b (41% of sales) – led by better demand in the LMIC region and portfolio expansion in the developed markets.
• API revenue edged up (5% YoY) to INR5.5b (43% of sales). Oncology API grew 16% YoY to INR600m. The ARV-API segment rose 23% YoY to INR4.1b, partially offset by a sharp fall (43% YoY) in Other API to INR769m.