HDFC Securities is bullish on Laurus Labs has recommended buy rating on the stock with a target price of Rs 470 in its research report dated August 05, 2019.
HDFC Securities' research report on Laurus Labs
Sequential decline in revenues (13%) and EBITDA (26%) was driven by postponement of Rs 350-400mn ARV API orders and higher overhead cost of inventory unsold. On a positive side, formulation revenues were 3x higher than our estimates, aided by pick up in TLD orders for Global Fund. For the full year, the management is confident of achieving more than Rs 4.2bn formulations revenues v/s our earlier estimates of Rs 2.8bn. gLyrica launch in the US, TLD ramp up in tender markets and commitment from EU partners enthuse us to upgrade our formulation estimates to Rs 3.9bn for FY20. It will remain the key driver for both growth and profitability. API revenues declined 20/25% YoY/QoQ to Rs 3.7bn, affected by lower offtake in ARVs, Hep-C, and oncology. Although we are confident of Laurus to recoup revenues in ARV and oncology in coming quarters, the Hep-C ramp up remains elusive. Model 6% API revenue decline for FY20.
Outlook
We maintain a BUY on Laurus despite poor operational performance in 1QFY20. After adjusting for lack of scale up in ARV APIs and buoyancy in formulation segment, we have cut our FY20/21E numbers by 5-8% to arrive at a TP of Rs 470/sh (18x FY21E EPS).
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