Laurus Labs reported just its results
The company saw a 87% erosion in profits!😥😥😥
The stock price still shot up!
What is happening with Laurus Labs?🤔🤔
A thread🧵on the business performance of Laurus Labs
Lets go👇
The company saw a 87% erosion in profits!😥😥😥
The stock price still shot up!
What is happening with Laurus Labs?🤔🤔
A thread🧵on the business performance of Laurus Labs
Lets go👇
What has happened?
Over the last 1 year, the Stock price has severely corrected
The stock has fallen nearly 23%
The company reported its numbers yesterday
Let's see how were the numbers
Over the last 1 year, the Stock price has severely corrected
The stock has fallen nearly 23%
The company reported its numbers yesterday
Let's see how were the numbers
Laurus Labs operates in the following areas:-
1. Active Pharmaceutical Ingredient(APIs)
2. Custom Synthesis
3. Formulations(FDF)
4. Biosynthesis
1. Active Pharmaceutical Ingredient(APIs)
2. Custom Synthesis
3. Formulations(FDF)
4. Biosynthesis
Major focus in APIs is on ARV, oncology and other APIs. It owns 11 manufacturing units (six FDA approved sites) with 74 DMFs, 32 ANDAs filed (15 Para IV, 11 first to file) and 192 patents granted
China+1 playing out:-
Sourcing from China:-
Generic or big Pharma for custom synthesis+APIs is very difficult!
Big Pharma wants to reduce its dependency on China India will have a lot of opportunities in custom synthesis and APIs
Sourcing from China:-
Generic or big Pharma for custom synthesis+APIs is very difficult!
Big Pharma wants to reduce its dependency on China India will have a lot of opportunities in custom synthesis and APIs
So how were the Q1FY24 results?
The results were not good
🧪Revenue declined by 22%
🧪Operating Margins eroded to just 15.4%
🧪Net profit fell by 84%
So what happened here?👇
The results were not good
🧪Revenue declined by 22%
🧪Operating Margins eroded to just 15.4%
🧪Net profit fell by 84%
So what happened here?👇
Formulations business(FDF):-
The business saw a sequential recovery
🧪ARV business which is a commodity business saw a tender win
🧪The business also saw a sharp price erosion
🧪The management expects this to recover from H2
The business saw a sequential recovery
🧪ARV business which is a commodity business saw a tender win
🧪The business also saw a sharp price erosion
🧪The management expects this to recover from H2
APIs:-
API business also saw a recovery:-
🧪 Non-ARV business also saw a resumption in shipments
🧪Oncology APIs saw a recovery
Both FDF+API businesses are experiencing a sequential recovery which good news
API business also saw a recovery:-
🧪 Non-ARV business also saw a resumption in shipments
🧪Oncology APIs saw a recovery
Both FDF+API businesses are experiencing a sequential recovery which good news
Custom Synthesis:-
The business saw a slowdown
The revenue declined due to a larger base.
Manufacturing to begin from 2HFY25.
This business is steady.
The business saw a slowdown
The revenue declined due to a larger base.
Manufacturing to begin from 2HFY25.
This business is steady.
Laurus Bio:-
The business has a small base.
It will continue to ramp up slowly.
The company acquired additional stake in Laurus Bio
The business has a small base.
It will continue to ramp up slowly.
The company acquired additional stake in Laurus Bio
Management commentary:-
🧪Pricing headwinds in ARV API and FDF
🧪As guided FY24 will be a difficult year
🧪No revenue guidance for the year
🧪Margins have probably bottomed out
🧪Pricing headwinds in ARV API and FDF
🧪As guided FY24 will be a difficult year
🧪No revenue guidance for the year
🧪Margins have probably bottomed out
🧪In FY25 animal health CDMO will be a key trigger
🧪Large volume APIs will commercialize in FY25
🧪Laurus Bio will continue to see a ramp up
🧪Large volume APIs will commercialize in FY25
🧪Laurus Bio will continue to see a ramp up
Has the margin bottomed out?
🧪ARV and FDF offtake is recovering
🧪Higher cost inventory meant the selling prices were lower but the raw material price was high
🧪Pricing pressure is already there
Margins have probably bottomed out
🧪ARV and FDF offtake is recovering
🧪Higher cost inventory meant the selling prices were lower but the raw material price was high
🧪Pricing pressure is already there
Margins have probably bottomed out
Risks/monitorable to the business:
Most of Laurus's new facilities come online at end of FY24 and FY25:
🧪Any delay in commercialization can be a material risk to the business.
🧪Pricing pressure and slower demand in the API / FDF space remain concerns.
Most of Laurus's new facilities come online at end of FY24 and FY25:
🧪Any delay in commercialization can be a material risk to the business.
🧪Pricing pressure and slower demand in the API / FDF space remain concerns.
🧪Ramp up in CDMO and Biotechnology segments
🧪Delay in the procurement of APIs in the developed world
🧪Delay in the procurement of APIs in the developed world
Valuation:-
Given the strong pipeline of expansion in the coming two years
Laurus now trades at roughly 15x EV/EBITDA
The Valuation is certainly not cheap
Given the strong pipeline of expansion in the coming two years
Laurus now trades at roughly 15x EV/EBITDA
The Valuation is certainly not cheap
Conclusion:-
🧪Laurus's core API and FDF business have started to recover
🧪Despite management guidance of pricing erosion bottoming out. There was further price erosion
🧪While the management remains optimistic,the ramp-up remains to be seen
🧪Laurus's core API and FDF business have started to recover
🧪Despite management guidance of pricing erosion bottoming out. There was further price erosion
🧪While the management remains optimistic,the ramp-up remains to be seen
🧪CDMO business should start to to do well from Q3
🧪Laurus Bio should also start to do well
🧪Laurus Bio should also start to do well
Laurus labs is a story of a company diversifying its API base with brilliant execution over the last 5 years.
The API and FDF businesses are undergoing a downcycle.
But what goes into a upcycle will definitely bottom out and go into an upcycle
The API and FDF businesses are undergoing a downcycle.
But what goes into a upcycle will definitely bottom out and go into an upcycle
When will the cycle bottom out and move up?
According to the management, the business has bottomed out now and should start to improve from Q2 onwards.
However, this needs to be closely monitored
According to the management, the business has bottomed out now and should start to improve from Q2 onwards.
However, this needs to be closely monitored
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Disclaimer:-
This is my own study
Not an investment recommendation
Please consult your own financial advisor before making any investment decisions
This is my own study
Not an investment recommendation
Please consult your own financial advisor before making any investment decisions
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