Laurus Labs – Can Business Transform to Next Level?

7dc7fcbb-ed78-4011-ae2a-91d6eae6891c.pdf (558.3 KB)

Highlights from the recent con call and my findings:

• Revenue New revenue streams Animal health and Crop Science in coming years 2-3. Formulation segment (good margins) is also expected to contribute.
• Margin expectations in the coming quarters Management gave a guidance for 20% EBITDA margin for the full year for the current FY. The first half had a margin of 14-15% so one should expect a margin of 23-25% in the next two quarters which can go on for the next few financial years.
• This anticipated improvement is attributed to a strong order book and scheduled deliveries, particularly within the CDMO segment.
• This year growth is driven by the CDMO segment
• CDMO division is expected to drive the majority of the growth in FY25, the management anticipates growth across all segments, including Generic API and FDF in the coming years Q4 call will give a much better picture
• Operating deleverage the company is going through a deleverage phase due to the cap ex in the growth initiatives along with the challenges in the generic API segment
• Operating deleverage ends the management mentioned that the deleverage may have ended and we can expect the leverage to come into play after one or two quarters
• Cap ex plan of 2000 cr: Majorly of which will be in the CDMO, around 200 cr in Formulation segment, api will receive the lowest share.
• Growth triggers: Continued CDMO Growth (already doing well and good quarters expected), New Revenue Streams from Animal Health and Crop Sciences (in 2-3 years), Generic API Growth Through Portfolio Expansion (Currently struggling and going through deleverage because of the expansion but deleverage has ended as per management and leverage can kick in after few quarters which can improve margins), Formulations Business Expansion (good margin business can move up in the value chain)

Next 2-3 years outlook is good as of now with good capital appreciation as per me.

Disclaimer: Invested. Not a recommendation.