Shares of Laurus Labs continued their upward journey in Tuesday’s session to hit a new high of Rs 599, up 5 per cent on the BSE, in an otherwise subdued market. The stock was quoting higher for the eighth straight trading day. In comparison, the S&P BSE Sensex was down 0.17 per cent at 52,237 points at 10:10 am.

Laurus Labs is a leading research-driven pharmaceutical manufacturing company in India. The company has grown to become one of the leading manufacturers of API (Active Pharmaceutical Ingredient) for anti-retroviral (ARV), oncology, cardiovascular, antidiabetics, anti-asthma, and gastroenterology. The company is thriving on growth opportunities in formulation manufacturing to service in all leading markets of North America, Europe, and Low Middle-Income Countries (LMIC).

The company is driving growth opportunities in Contract Development and Manufacturing (CDM) through its synthesis business. Most of the company’s manufacturing facilities are approved by major regulatory authorities, USFDA, WHO-Geneva, UK-MHRA, etc.

In the past three months, the stock of Laurus Labs has outperformed the market by surging 73 per cent after the company’s promoters released most of the pledged shares by selling their stake. In comparison, the S&P BSE Sensex was up 3.7 per cent during the same period.

As of March 31, 2021, around 1.15 per cent of the total promoters’ holding were pledged, as compared to 15.76 per cent of the holding pledged at the end of December 2020 quarter, the shareholding pattern data shows.

On March 4, 2021, Dr Satyanarayana Chava, Founder Promoter, CEO & ED, and Nagarani Chava, one of the promoters of the company, had collectively sold a combined 7 million shares worth Rs 258 crore in the open market.

That apart, the management guided at a capex of Rs 1,500 crore over the next two years. About 50 per cent, 30 per cent and 20 per cent of capex is to be invested in the API, FDF and CDMO segments, respectively. It is confident of sustaining a 30 per cent EBITDA margin in FY22. The debottlenecking exercise in FDF (Fixed Dosage Formulations) has been completed in March 2021 and the commercial benefit will accrue from H1FY22 onwards. The new manufacturing block will be commercialised by September 2021.

The company is adding capacity in non-ARV API products, which would be commercialised by FY22 end, aiding meaningful growth from FY23 onwards. From FY23 onwards, growth in the synthesis business (11 per cent of sales) would outpace growth in the API/FDF segment, based on active projects and capacity addition.

Analysts at Motilal Oswal Financial Services remain positive on Laurus Labs on the back of its superior execution in the ARV segment, its strong chemistry skill set, which is driving the CDMO business, the addition of new molecules in the Other API segment, cost efficiency aiding profitability, and addition of new levers in CDMO with Laurus Bio.

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