Motilal Oswal is bullish on Laurus Labs has recommended buy rating on the stock with a target price of Rs 470 in its research report dated April 10, 2019.
Motilal Oswal's research report on Laurus Labs
We believe Laurus Labs is at the cusp of strong earnings growth over FY19-21E, led by increased traction in its formulation business and changed product mix in the API segment. The recently awarded formulation contracts provide enough scope for Laurus to break-even in FY20 and improve profitability. We expect headwinds in the ARV-API business due to lower offtake of Efavirenz, which should get offset by supply of newer molecules. Accordingly, we expect 69% CAGR in earnings over FY19-21E. We expect RoE to improve from 6% in FY19 to ~14% in FY21 due to improving operating leverage in the formulation business and strong traction in the synthesis business. We value Laurus at 18x 12M forward earnings to arrive at a target price of INR470. Resume BUY (earlier Under Review).
Outlook
We expect 69% earnings CAGR over FY19-21E to INR2.6b. We value Laurus at 18x 12M forward earnings (to factor in forward integration and strong growth in earnings) and arrive at a target price of INR470. We resume a Buy rating on the stock (earlier Under Review).
For all recommendations report, click here
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