Synopsis: Laurus Labs bagged mixed reactions from different brokerages despite positive results. The brokerages cited that its CDMO segment price is already fully priced in the stock price.
The shares of this leading research-driven pharmaceutical and biotechnology company are in focus after leading global brokerages like Jefferries and Goldman Sachs have cited their viewpoints on this company. In this article, we will dive more into the details.
With a market capitalization of Rs 50,042 crore, the shares of Laurus Labs Ltd reached a day’s low of Rs 901.85 per share, down 4 percent from its previous day’s closing price of Rs 936.75 per share. Over the past five years, the stock has delivered a return of 178 percent, outperforming NIFTY 50’s return of 117 percent.
Analyst Comments
Jefferies was one of the brokerages that kept their Underperform rating on Laurus Labs while increasing the target price to Rs 700 per share, signaling a downside potential of 25 percent from its previous closing price.
The brokerage observed that the main reason for the second-quarter earnings beat was the ARV segment’s performance, which was stronger than expected because of the shipment timing. Nevertheless, Jefferies warned that the overall outlook of the ARV business is still pessimistic apart from the short-term uplift
Goldman Sachs, in a similar way, continued its Sell rating while raising the target price to Rs 775 from Rs 750 earlier, signaling a downside potential of 17 percent from its previous closing price.
The brokerage cited that Laurus Labs came out with a good quarterly result, showing recovery and effective management; however, most of this power is already factored into the price. The brokerage kept a cautious stance because of the firm’s significant capital expenditure plans and stated that better asset turnover would be the key to maintaining returns. It considers that the stock is trading at a high valuation, thus there is very little room for the share price to go up in the near term.
Management Guidance
During the post-earnings call, Laurus Labs’ management informed that they expected antiretroviral (ARV) sales of approximately Rs 2,500 crore with a possible deviation of Rs 200 crore (+/-).
The company is anticipating gross margins to be maintained at around 60 percent, which is even higher than the previously guided range of 50-55 percent. Moreover, the company is striving to increase its asset turnover ratio from the current 0.9 times to 1.1 times within the next few quarters. It also added that it is committed to closing FY26 EBITDA at 25 percent and will do a capex of around Rs 500 crore within the next six months, which will help the company in becoming an integrated player in the CDMO segment.
The team management believes that, as the product mix changes towards the currently small and large-molecule CDMO (Contract Development and Manufacturing Organization) segments, its profitability and margins will continue to rise.
Laurus Labs Limited is a research-driven multinational pharmaceutical and biotechnology company. It specialises in manufacturing high-quality active pharmaceutical ingredients (APIs), generic formulations, and contract development and manufacturing (CDMO) services.
The company focuses on advanced areas such as cell and gene therapy, flow chemistry, biocatalysis, and antibody-drug conjugates (ADCs). It has built a large and diverse team of over 7,500 employees, including more than 1,400 scientists, reflecting its strong emphasis on innovation and research.
Written by Satyajeet Mukherjee
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