Laurus Labs – Can Business Transform to Next Level?

I have been following this company for quite some time and my understanding on the recent performance of Laurus Labs reflects below
The report, management commentary, and last 4Qs indicate that there is a major challenge w.r.t to LL business.
The thing which played out here according to me – LL put up aggressive guidance of 1B sales (which excites market participants) and this target look possible given the surge in revenues in FY21. Majority of the investors linked this surge to the operating leverage kicking in the business, but is this really sustainable is what decides fate of Laurus.

Management put guidance of Rs 1B on the basis of three fronts:

1. In the anticipation of everything going 2021 way for ARV (Api+Fdf).
2. New additional Non-Arv Api+FDF( coming on stream from Q3-Q4 onwards)
3. Having confirmed Custom synthesis order including paxlovid.
   So what went horribly wrong for LL is related to point 1 that the Covid-led demand mismatch causes a bump in revenues in FY21 and it started to coming back to normalcy in FY22 and it ultimately fall back to where it should be in FY 23, which is quite visible in the recent LL results of FDF and SA tender pricing.
   The report is highlighting only this above aspect that with CSM also return to normal run rate and along with Arv api+fdf margin will fall and this points seems valid and make sense. Check their pre covid Ebitda margins.

Major learning from this is that sometimes management also doesn’t have clear visibility or understanding of their business, for instance we got to know about channel destocking of Arv products but Dr.Chava never mentioned about excess stocking happening by customers in FY21 itself.
Same goes with CSM business they don’t give clear answer on sustainability of revenues.