Laurus Labs 1QFY20 results: Temporary troubles, growth story intact

Dated: 6th August 2019

1QFY20 result update:

• Consolidated Revenue grew 2% YoY (-% QoQ) to Rs 5,506 mn. API, Synthesis, Ingredients and FD segments contributed to 67%,11%,3% and 19% of revenues  respectively.
• EBITDA declined 3% YoY (+27% QoQ) to Rs 832 mn. Reported EBITDA margins contracted by 80 bps YoY to 15.1% from 15.9% in 1QFY19.
• Net Profit fell 9% YoY to Rs 151 mn

Management Commentary:

• Due to delay in shipment, revenues of Rs 750-100 mn are pushed to 2QFY20.
• Laurus has incurred capex of Rs 450 mn in 1QFY20 and has guided for Rs 1,500-2000 mn capex in FY20.
• Laurus is very positive about finished dosage business and expects revenues to reach to Rs 4,200 mn for FY20.
• Company expects ~10% growth in API business for FY20. Company expects ARV revenues to be in the range if Rs 1,300-1,400 mn in FY20
• Laurus has completed backward integration and supply issues from China have been mitigated. This has led to an improvement in the gross margin.

Consensus Estimate (Source: marketscreener website)

• The closing price of Laurus is Rs 317/- as on 6^th August 2019. It traded at 18x / 12x the consensus EPS for FY 20E / FY 21E of Rs 17.2 / 26.7 respectively.
• Consensus target price of Rs 435/- implies a PE of 16x on FY21E EPS of Rs 26.7.