Laurus Labs is in a tricky spot, where it is undergoing capex cycle, sees flattish top-line growth for the next year, and is making endeavours to improve margins, said a brokerage. Shares of Laurus Labs plunged 10 per cent in Thursday's trade amid a selloff in pharma stocks. Today was the record date for Laurus Labs dividend. The scrip fell 9.95 per cent to hit a low of Rs 299.30 on BSE. With this, the scrip has fallen 31 per cent in the last six months. The stock hit a 52-week low of Rs 279.65 on April 28. The scrip has been week as the drug maker reported a weak set of quarterly results of late.
Analysts noted that Laurus Labs delivered a miss on earnings, led by a sharp decline in the Synthesis (CDMO) business. The ARV business was stable sequentially, indicating a decrease in the extent of price erosion in the base portfolio.
Motilal Oswal Securities expects FY24 to be a year of consolidation for Laurus Labs in terms of sales.
Despite a high base in FY23, due to purchase order-related supplies, Laurus Labs intends to drive sales in FY24, led by revenue expansion in base pipeline CDMO projects. The animal health contract is expected to pick up in 2HFY24, Motilal Oswal Securities said in a recent note.
Choice Broking in a recent note said Laurus' gross margin at 49.7 per cent was the lowest in the last three years due to the depressed pricing in ARV, APIs, formulations, and change in product mix.
Ebitda margin at 20.7 per cent was significantly down due to negative operating leverage, it said.
The management expects to maintain an Ebidta margin above 20 per cent for FY24. Choice Broking expects gross margin and Ebitda margin to improve gradually from the given level as a result of improvement in product mix, cost improvement measures, and operating leverage expected to kick in FY25.
"At the current juncture, Laurus is in a tricky spot, where it is undergoing capex cycle (INR 1,000mn in FY24), sees flattish top-line growth for the next year, and is making endeavours to improve margins. Further, there exists pressure to generate FCF as it has only managed to generate FCF of Rs 38 crore in the last 2 years. We expect Laurus’s performance to remain subdued in FY24 and to show gradual signs of improvement in FY25," it said.