Result Analysis : Laurus Lab – Q2FY21

Result Analysis : Laurus Lab – Q2FY21

Total revenue from operations 1,139 Cr 

712 Cr (59.97%) YoY | 974 Cr (16.92%) QoQ 

Half yearly revenue: 2,113 Cr Vs. 1,263 Cr (65.84%)

Net Profit of 242.2 Cr 

56.5 Cr (332.12%) YoY 171.8 Cr (40.89%) QoQ 

Half yearly Net profit: 414 Cr Vs. 71.6 Cr (478.21%)

EPS (in Rs.) 4.50

1.06 YoY | 3.21 QoQ 

Half year ending EPS: 7.71 Vs. 1.34

View: Result is above expectation and strong. YoY and QoQ revenue increased and profit multifold in YoY. Margin continue expanding in QoQ and YoY. 

Business Updates & Highlights

Q2FY21 EBITDA was around INR 373.5 Cr Vs. 137.8 Cr in Q2FY20 Vs. 278.2 Crs in Q1FY21 therefore up by 172.2% in YoY and up by 34.1% in QoQ. EBITDA margin is around 32.7% Vs. 19.2% in YoY Vs. 28.5% in QoQ. Therefore EBITDA margin improved by 1350 bps in YoY and 420 bps in QoQ.

H1FY21 EBITDA was around INR 651.4 Crs Vs. 220.2 Crs in H1FY20 therefore up by 196% in YoY. EBITDA margin in H1FY21 was around 30.8% Vs. 17.4% in H1FY20. 

R & D spent of INR 85 Cr and 4% of sales in H1 FY21.

Business vertical performance

Generic FDF

Revenue growth of 183% for the quarter (YoY) Vs. 9.3% in QoQ and 202% for H1 (YoY).

Generic FDF business maintains robust growth momentum for the quarter. The growth in the quarter was led by higher sales from tender business in LMIC; having a strong order book for coming quarters.

Launched TLE400 in LMIC markets . Launched TLE400 & TLE600 in US market. 

2 product validations completed for formulation apart from filling of 26 ANDAs & NDAs. 8 products received Final Approvals, and 8 products have received Tentative Approvals

Synthesis & Ingredients

Revenue showcased the growth of 36% for the quarter (YoY) Vs. 16% in QoQ and 37% for H1 (YoY) 

Total Number of Active Projects in the CDMO division stood at 49 as of H1 FY21

Generic API

Revenue from Generic API segment showcased the growth of 22% for the quarter (YoY) Vs. 28.4% in QoQ and 30% for H1 (YoY)

The Anti-Viral segment showed growth of 20% in YoY and 12.8% in QoQ and 19% for H1 (Y-o-Y) and is expected to have good growth for the full year

In the Other API segment - Contract manufacturing of Generic APIs showing robust growth 18% in the quarter (YoY) and 80% for H1 (YoY)

Filed 264 patent applications and 130 patents granted as on Sept 30, 2020.

The Board of Directors of the Company in their meeting held on October 29, 2020 have approved for the payment of interim dividend of Rs. 0.80/- ( 40%) per equity share of Rs.2/each

Financial

ROE and ROCE is around INR 41.8% and 37.5% respectively and book value per share is around INR 33 and share is currently trading at 10x of its book value. Company is currently trading at annualized PE (forward PE) of 24 which is good as per Industry benchmark. Promoter holding is around 32.1% in the company which is low but stable. FIIs and Mutual fund hold around 20.7% and 3.3% in the company which FIIs increased by more than 4% in this quarter also.. Company is very strong operating cash flow as of Sep 2020 it was around INR 336 Cr Vs. 142 Cr in Sep 2019 (Very Strong). Borrowing is also declined in this quarter and borrowing cost is also downward. 

Share View Share price high 340 (52 week) and now 331. Laurus Labs is a leading research-driven Pharmaceutical Manufacturing Company in India. Ine of the leading manufacturers of API for Anti-Retroviral (ARV), Oncology, Cardiovascular, Anti-Diabetics, Anti-Asthma, and Gastroenterology. Formulation manufacturing to service all leading markets of North America, Europe, and Low Middle-Income Countries (LMIC).

Position: Share support price is INR 300/270. Long term investor should continue with the company and any correction will give good opportunity

Opportunities Laurus has a portfolio with more than 60 commercialized APIs with strong presence in ARV, Oncology, anti-diabetic and Hepatitis C therapeutic segments. Further the company has forayed into formulation on a large scale from Unit II in FY20 resulting in major revenue being contributed from that segment i.e. about 29% in FY20 as against about 2% during FY19. Partnership with Global Fund offers higher volume contracts with reasonable predictability in FDF Tender business. Have a healthy order book for FY 21 & beyond in FDF CMO business with a strategic partner in EU. Generic FDF segment contributed 38% in H1 FY 21 to total revenue as against just 2% in FY19. Increased focus and eventually dedicated R&D and Manufacturing for Synthesis Business and overall focusing on growth model for future years. Doubling capacity of FDF by 2022. Among top 5 in India in terms of Reactor capacities. Strong board of management and it was promoted by Dr. Satyanarayana Chava (Whole time Director & CEO) who has over 30 years of experience in the pharmaceutical industry and oversees the technical aspects of operation including R&D, process development, etc. The company has filed 257 patents application out of which 116 patents were granted as on March 31st, 2020.

Risk Laurus has moderate operating cycle period which has improved to 146 days during FY20 as against 161 days during FY19 still its on higher side as compare to other Pharma companies. Laurus is exposed to foreign exchange fluctuation risk in view of large volume and high value transactions of export and import, a phenomenon common to the players in the industry. The pharmaceutical industry is highly regulated in many countries and requires various approvals, licenses, registrations and permissions for business activities. The approval process for a new product registration is complex, lengthy and expensive.

Sources: Various publications

Disclaimer: The information provided herein is based on publicly available information and other sources believed to be reliable, but involve uncertainties that could cause actual events to differ materially from those expressed or implied in such statements. The document is given for general and information purpose and is neither an investment advice nor an offer to sell nor a solicitation. While due care has been exercised while preparing this document, we do not warrant the completeness or accuracy of the information. We will not accept any liability arising from the use of this material. The recipient of this material should rely on their investigations and take their own professional advice.

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