Laurus Labs reported its results yesterday
The company saw a 88% erosion in profits!😥😥😥
The recovery of the business is taking longer than expected
What is happening with Laurus Labs?🤔🤔
A thread🧵on the business performance of Laurus Labs
Lets go👇
The company saw a 88% erosion in profits!😥😥😥
The recovery of the business is taking longer than expected
What is happening with Laurus Labs?🤔🤔
A thread🧵on the business performance of Laurus Labs
Lets go👇
What does Laurus labs do?
Laurus Labs operates in the following areas:-
1. Active Pharmaceutical Ingredient(APIs)
2. Custom Synthesis
3. Formulations(FDF)
4. Biosynthesis
Laurus Labs operates in the following areas:-
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 Q3FY24 results?
The results were not good
🧪Revenue declined by 23%
🧪Operating Margins eroded to just 15.3%
🧪Net profit fell by 88%
So what happened here?👇
The results were not good
🧪Revenue declined by 23%
🧪Operating Margins eroded to just 15.3%
🧪Net profit fell by 88%
So what happened here?👇
Fomulations business(FDF)-
FDF business saw a good sequential recovery of 11%
The underlying demand trend remains healthy with new tender wins.
The management expects continued recovery in this business driven by market share gains
FDF business saw a good sequential recovery of 11%
The underlying demand trend remains healthy with new tender wins.
The management expects continued recovery in this business driven by market share gains
APIs:
API business saw a sluggish offtake.
It fell by 9% both yearly and quarterly.
Subdued pricing in API was seen.
The management expect better delivery in the Oncology and the ARV API from Q4
API business saw a sluggish offtake.
It fell by 9% both yearly and quarterly.
Subdued pricing in API was seen.
The management expect better delivery in the Oncology and the ARV API from Q4
Custom Synthesis Business Leads:-
Custom Synthesis business saw a sharp decline owing to a higher base
Expansion in CDMO capabilities on track to capture new opportunities and accelerate growth
Custom Synthesis business saw a sharp decline owing to a higher base
Expansion in CDMO capabilities on track to capture new opportunities and accelerate growth
Laurus Bio:-
The business has a small base.
It will continue to ramp up slowly.
The ramp up has been now pushed back by at least an year
The business has a small base.
It will continue to ramp up slowly.
The ramp up has been now pushed back by at least an year
Laurus Labs was once just an ARV API player
Over the last 5 years they have brilliantly diversified into
1. Other APIs
2. CDMO
3. FDF
4. Laurus Bio
A story of strong execution
Over the last 5 years they have brilliantly diversified into
1. Other APIs
2. CDMO
3. FDF
4. Laurus Bio
A story of strong execution
Management Commentary
Management commentary:-
🧪Pricing headwinds in ARV API and FDF
🧪As guided FY24 will be a year of consolidation
🧪No revenue guidance for the year
🧪Margins have probably bottomed out
Management commentary:-
🧪Pricing headwinds in ARV API and FDF
🧪As guided FY24 will be a year of consolidation
🧪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 slower than expected
🧪Pricing pressure is already there
Margins have probably bottomed out
🧪ARV and FDF offtake is recovering slower than expected
🧪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 slower than expected
🧪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 slower than expected
🧪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 H2 onwards.
However, this needs to be closely monitored
According to the management, the business has bottomed out now and should start to improve from H2 onwards.
However, this needs to be closely monitored
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📈Investing
📈Stock Analysis
Go to my profile and hit the bell icon🔔to always stay updated
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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