MOSL: LAURUS LABS (Buy)-More of revenue-led growth-operating leverage yet to kick in
Laurus Labs: More of revenue-led growth; operating leverage yet to kick in
(LAURUS IN, Mkt Cap USD0.6b, CMP INR400, TP INR470, 18% Upside, Buy)
- Onco/Other APIs, Synthesis and Formulations drive growth: 4QFY19 sales increased 13.4% YoY to INR6.3b (v/s our est. of INR5.6b), led by (i) strong growth in Onco APIs (11% of sales; +91% YoY), (ii) other APIs (10% of sales; +40% YoY), and (iii) Synthesis (15% of sales; +74% YoY). Formulation sales came in at INR282m v/s INR14m in 4QFY18. Hep-C API sales increased to INR415m from INR197m in 3QFY19. However, growth was impacted by a reduction in base ARV-API business (50% of sales; -14% YoY).
- Margins impacted due to higher RM and other expenses: Gross margins (GM) shrank 190bp YoY to 46% due to a change in the product mix. EBITDA margin contracted 320bp YoY to 17.6% owing to lower GM and higher other expenses (16.9% v/s 15.2% in 4QFY18). On QoQ basis, there has been 100bp/330bp improvement in GM/EBITDA margin. Adjusting for transfer of ANDA rights to Casi Pharma in 3QFY19, PAT was down 4% YoY to INR432m (v/s our est. of INR224m). On a full-year basis, LAURUS had sales of INR23b (+11% YoY), EBITDA of INR3.7b (-9% YoY) and PAT of INR1b (-34% YoY).
- Key concall Highlights: (1) LAURUS has guided for completing most ARV filings (for the first and second line treatment) by end-FY20. (2) It has supplied validation batch of Lamivudine and DTG to partners in 4QFY19. (3) LAURUS also guided to maintain ARV-API sales in FY20 as loss of Efavirenz sales would be offset by sales of Lamivudine, Tenofovir intermediates and DTG APIs. (4) LAURUS has commercialized Metformin in the US and has single-digit market share.
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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