Domestic brokerage firm Sharekhan remains bullish on pharma company Laurus Labs and has a target price of ₹735, indicating an upside of over 24 percent in the next 1 year. The current market price of the stock is ₹590 per share.
The stock has risen around 66 percent in the last 1 year and 14 percent in 2022 YTD.
As per the report, despite a high base, the finished dosages (FD) sales have staged a strong 13 percent y-o-y growth for 9MFY22 and the management expects the traction to improve further. It also noted that Laurus’s synthesis business has recorded an impressive 62 percent y-o-y growth for 9MFY2022, backed by traction in existing commercialised molecules and new customer additions.
In addition to the emerging opportunities at the industry level, the recent win of a multi-year contract with a global life sciences company bodes well and the company is investing around ₹450 cr to set up a dedicated facility for the same, added Sharekhan.
"Benefits from the contract are expected to accrue from FY2025E and provide ample visibility on long-term growth. Also, Laurus Bio is expected to gain significant traction as it has recently completed a massive expansion plan. Overall collectively, Synthesis and Laurus Bio account for 18 percent of the overall 9MFY22 sales and by FY2025E the management expects this to increase to 25 percent," the report pointed out.
Further, High base, channel de-stocking in its key end-user markets has led to an 18 percent y-o-y decline in 9MFY22 active pharma ingredient (API) sales.
Sharekhan noted that amongst the APIs, antiretrovirals (ARV) were the most impacted, which recorded a decline of 26 percent. Though the management expects a material improvement to be visible in ARV-API’s from the first quarter of FY23 onwards, the brokerage believes a likely sequential improvement in the fourth quarter of FY22, which bodes well.
Going ahead, the brokerage believes that the Synthesis segment, backed by a growth in demand from existing customers, and ongoing client additions, is set to stage a strong double-digit growth. Due to an expected sequential improvement in the ARV-API’s the Q4FY22 performance is expected to be better as compared to Q3FY22, it added.
However, any delay in product approvals or any negative outcome of facility inspection by the USFDA can affect earnings prospects, noted Sharekhan.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.
