Laurus Labs –

Q1 FY 25 results and concall updates –

Revenues – 1195 vs 1182 cr
Gross margins @ 55.1 vs 50.6 pc – a key indicator of health of the business
EBITDA – 171 vs 168 cr ( margins @ 14.3 vs 14.2 pc )
PAT – 13 vs 25 pc

Revenues led by strong demand in Oncology APIs, ARVs. Delivery schedule in CDMO business in Q1 was tepid

Gross margins @ 55 pc – is a key indicator of business profitability. As the capacity utilisation of company’s assets improves, profitability can potentially show a major improvement

Spends on new initiatives – Cell and Gene therapy + Animal Health were at 15 cr

Segment wise revenues –

CDMO – 214 vs 250 cr, down 14 pc – CDMO deliveries are scheduled for key late phase NCE projects in Q4. Witnessing significant interest from new customers, momentum in RFPs continued from big Pharma and key Biotechs. Total active CDMO projects ( including intermediates @ 70 !!! ). Out of these, 10 projects are in commercial stages. 20 projects are in Animal health + Crop protection spaces. Have started supplying commercial validation batches of the Animal Health, Crop health projects

APIs – 664 vs 597 cr, up 11 pc – led by strong growth in Onco APIs ( up 120 pc YoY ). Segment wise breakup of API sales –

Onco APIs – 18 vs 9 pc YoY
ARV APIs – 60 vs 68 pc YoY
Other APIs – 22 vs 23 pc YoY ( could have grown stronger but the sales were deferred by shipment delays )

FDFs – 274 vs 285 cr, down 4 pc – fall in ARV FDF volumes ( down 20 pc ) compensated by good growth in developed market exports ( up 25 pc )

Bio – 43 vs 50 cr, down 14 pc – stable Qtr with healthy traction in bio CDMO services. Initiated discussions with several strategic customers for long term CDMO collaboration. Commercial fermentation facility build up on track in Vizag

Company’s manufacturing footprint –

Vishakhapatnam –

Unit – 1 @ Parawada – 1279 KL – APIs + CDMO
Unit -2 @ Atchutapuram – 89KL, 10 billion units – APIs + FDFs
Unit -3 @ Parawada – 2318 KL – APIs + R&D
Unit – 4 @ Atchutapuram – 1959 KL – APIs + CDMO
Unit – 5 @ Parawada – 161 KL – CDMO
Unit – 6 @ Atchutapuram – 1479 KL – APIs
LSPL – 1 @ Parawada – 139 KL – APIs + CDMO
LSPL – 2 @ Atchutapuram – 283 KL – CDMO

Hyderabad –

Sriam – 81 KL – APIs
Kilolab – 4.5 KL – APIs + CDMO + R&D
New R&D center – under development

Bengaluru –

R1 – 15 KL – Bio synthesis + R&D
R2 – 225 KL – Bio synthesis

Kanpur –

Gene Therapy – R&D

Marketing offices –

Winchester – UK
Hamburg – Germany
New Jersey – US

Company has spent very aggressively ( @ 2600 cr ) on Capex in last 3 yrs. Hence, most of its manufacturing facilities are under-utilised. As their capacity utilisation improves, so shall company’s profitability

Company has signed a new long term CMO contract for FDFs with a new customer. Customer is also funding CAPEX for the subject supplies that are expected to begin in FY 27

Company has also spent a lot of money ( @ 470 cr ) on cell and gene therapy + Bio catalaysis. Company is working on 10+ Bio Catalaysis projects with various customers

Animal health products – manufacturing facility is undergoing early ramp-up phase, commercial validation have started

Crop Protection products – manufacturing facility’s inspection and qualification is expected by end of FY 25

Company has formed a 49:51 JV with a Slovenian healthcare company – KRKA ( in Feb 24 ) to manufacture and market formulations in India and non EU mkts

Company has – till date filed 41 ANDAs in US mkts and has obtained 21 final approvals, 14 tentative approvals. Their current formulations R&D has 62 products in the pipeline

R&D spends in Q1 were at 5.4 pc of topline ( healthy levels ) – up 35 pc YoY

Company is in the process of setting up a Bio – Fermentation manufacturing facility in Vishakhapatnam. Likely to be commissioned by June 26. Total capex requirement for this facility should be around 200 cr

Company passed 02 USFDA inspections in Q1 – at their large API manufacturing sites – Parawada -1 & 3 – without major observations – a key positive

Net Debt stands @ 2633 cr

Company also hosted / has undergone 14 customer audits by CDMO customers in Q1 ( that’s a large number ). Company is definitely seeing greater interest from customers from West for their facilities for potential award of late stage CDMO contracts

Company has increased its count of scientists working on CDMO division from 200 in 2019 to 800 scientists currently. That’s a huge jump and this also costs a lot of money ( operational expenses ). This should bear fruit as the CDMO division’s revenues pick up

ARV API + ARV Formulations sales for Q1 stand @ 552 cr ( out of a total topline of 1195 cr )

As their animal health and other important CDMO contracts pick up wef H2 this year and their crop protection product deliveries start next year, the percentage of business coming from ARVs should start to fall meaningfully – that would be a key positive for the company as ARV part of the business is unlikely to grow in future

Company is guiding for a consolidated EBITDA margin of 20 pc for full FY 25

Capex guidance for next 2 yrs @ 1800 – 2000 cr !!! ( majority of that for CDMO business )

The pickup in CDMO business in H2 that company is talking about is supply of materials for product registrations post Phase-3. Hence, logically – a lot of commercial scale manufacturing should come their way in FY 26

Disc : initiated a tracking position, intent is to hold on for next 6-9 months and look out for business improvement, not SEBI registered, not a buy/sell recommendation

Hello

If you read close;ly… there is a certain regularity which is getting into their business and they are more foussed on monetizing Bio similars … They also have API’s ( linked to their generics ) and some generics and small molecules. Gestation of their business is long. and can be cyclical . They also spend sizable amount on R & D and call it out. They claim to make 30 % margin ex R &D and once R & D pipeline generates sizeable revenue . Numbers will start showing up . They also are probably best CDMO player potentially with 100 % India presence … There are off and on events which impact the companys standing but really not so much to sleep over. There is also an optonality about Bicara which not many people know about.

To round it off about Madams larger than life image, she is what she is and nothing much you can do about it Suffice it to say that there is a capable team below at all levels …

Thanks

Malolan

They are not value investments in true sense but to me it seems they have more probability of going up and more upside than going down and has less downside ( Assuming no complete market meltdown).

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