Laurus Labs Ltd faced a significant drop in its stock price, hitting a lower circuit during Thursday’s trading session. The pharmaceutical company reported a challenging performance in the December 2023 quarter, leading to mixed reviews by brokerage firms. The net profit for the quarter was 23.84 crore, marking an 88.5% YoY decline, primarily driven by a 67% YoY fall in the CDMO-synthesis business. In the same period the previous year, the company had reported a bottom line of 203.06 crore.
Revenue also witnessed a substantial decline, falling 22.6% YoY to Rs 1,195 crore, and the Ebitda for the December 2023 quarter dropped 55% YoY to Rs 181 crore. The Ebitda margin for Q3FY24 was 15.3%, remaining below the 20% mark over the last three quarters.
Kotak Institutional Equities characterized Laurus Labs’ performance as “forgettable,” citing another quarter of weak results on multiple fronts. While anticipating an improvement in non-CDMO sales starting 4QFY24, the brokerage firm expressed concerns about the margin revival, which heavily depends on a significant ramp-up of the CDMO segment. It maintained a ‘sell’ tag on the stock with a fair value pegged at Rs 285.
The crop science contracts in 2HFY25 raised concerns about the lack of visibility on other commercial CDMO contracts. Kotak Institutional Equities highlighted downside risks to its lowered assumption of Rs 1,520 crore synthesis sales in FY2025E due to the steep ask rate from the current Rs 900 crore annual run rate.
Post the announcement of these results, Laurus Labs’ shares plunged 10%, triggering the first lower circuit limit on Thursday, reaching Rs 358.70, with a total market capitalization of less than 19,000 crores.
Laurus Labs’ management, in its guidance, emphasized prioritizing investments and growth in the business. The company expects overall business momentum to pick up, supported by a healthy order book, strategic manufacturing partnerships, and ongoing cost initiatives.
However, brokerage firm Motilal Oswal noted a delay in the ramp-up of sales from the CDMO and Non-ARV segments, affecting the company’s performance adversely for 3QFY24. It lowered its PAT estimates, factoring in a gradual pick-up in animal health contracts, a delay in scale-up of Non-ARV formulation, and a moderation in pricing of the Non-ARV API products. Motilal Oswal valued the stock at 25 times 12 months forward earnings, arriving at a target price of Rs 440 with a buy rating.
On a global scale, Citi maintained a ‘sell’ rating on Laurus Labs but raised its target price to Rs 315 per share. Jefferies also maintained an ‘underperform’ tag on the company and reduced its target price to Rs 250 apiece.