MOSL: LAURUS LABS (Buy)-Healthy formulation revenue, operating leverage drive earnings
LAURUS LABS: Healthy formulation revenue, operating leverage drive earnings
(LAURUS IN, Mkt Cap USD0.6b, CMP INR378, TP INR440, 16% Upside, Buy)
Robust revenue trends, except in ARV-API/Hep-C: Revenue increased robustly by 21% YoY to INR7.1b (our estimate: INR6.4b) in 2QFY20, led by strong formulation (FDF) sales of INR1.6b (2QFY19: INR22m). Other-API (+61% YoY), Ingredients (+179% YoY), Oncology API (+28% YoY) and Synthesis (+14% YoY) businesses too contributed to revenue momentum. ARV-API (-23% YoY) and Hep-C (-47% YoY), however, were weak.
- Product mix superior: Gross margin expanded 295bp YoY to 49.5%, led by the increased share of FDF sales. EBITDA margin too improved 385bp YoY to 19.3% (our estimate: 17%), led by a better product mix and lower opex (-75bp YoY). EBITDA increased 51% YoY to INR1.4b (our estimate: INR1.1b). PAT doubled YoY to INR566m, driven by strong sales growth, superior margins and a lower tax rate. For 1HFY20, revenue/EBITDA/PAT were up 12%/34%/118% YoY to INR12.6b/INR2.3b/INR716m.
- Key concall highlights: (1) LAURUS has garnered mid-teen market share in Pregabalin for the US market. (2) The company has launched three products in the US market. (3) Changes in the regimen and the delay in the announcement of supplementary tender results moderated ARV-API business. (4) About two thirds of formulation sales are from LMIC and one third from North America/EU.
Laurus Labs Ltd. Laurus Labs Limited, formerly Laurus Labs Pvt Ltd, is an India-based research and development pharmaceutical company. The Company is a manufacturer of active pharmaceutical ingredients (APIs) for anti-retroviral (ARV) and Hepatitis C. It also manufactures APIs in oncology and other therapeutic areas. Its business units include Laurus Generics API, Laurus Generics FDF, Laurus Ingredients and Laurus Synthesis. The Company develops and manufactures specialty ingredients for use in nutraceutical/dietary supplements and cosmeceutical products. Its products include Bis-desmethoxycurcumin, Caffeic Acid, Caffeic acid phenylethyl ester (CAPE), Curcumin, Curcuminoids, Diindolylmethane (DIM), Ferulic Acid, Luteolin, Nobiletin and Piceatannol. Its Laurus Synthesis division offers services in over two segments of Contract Manufacture and Contract Development. Its Contract Development includes drug substance services, analytical development services and product development services.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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