1 August 2020
1QFY21 Results Update | Sector: Healthcare
Laurus Labs
Estimate change
TP change
Rating change
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CMP: INR934
TP: INR1215 (+30%)
Metamorphosis underway
Buy
Sharp ramp-up in earnings led by FDF/API and higher operating leverage
Laurus Labs (LAURUS) delivered all-time high quarterly PAT at INR1.7b. It is
more than average of annual PAT over FY17-20. The company expects this
to be sustainable on the back of diversified portfolio, increased customer
base, addition of capacity for API/formulation and supported with better
operating leverage.
After a long wait, the efforts towards product development/building
manufacturing base are reflected in the phenomenal financial performance.
In fact, 1QFY21 redefines the earnings assessment over near to medium
term. Aligning with the new guidance, we raise our estimates to 2x our
previous estimates for FY21/FY22. Our target PE remains unchanged and
target price of INR1,215 at 17x 12M forward earnings factors just the
earnings upgrade. Sustainability of growth momentum in FY22 can drive
further re-rating. Reiterate Buy.
LAURUS’ 1QFY21 revenues grew at a robust rate of 77% YoY to INR9.7b
(est.: INR7.2b), led by Formulations (FDF; 36% of sales) revenue of
INR3.5b v/s INR1.1b YoY, Other API (14% of sales) revenue of INR1.3b v/s
INR440m YoY, 37% YoY growth in CDMO (10% of sales), and 19% YoY
growth in Anti-Viral API (35% of sales).
FDF sales growth was led by the execution of orders from Global Fund and
PEPFAR, and country-specific tenders in the ARV segment; increased
volumes of commercialized ANDAs; and (partly) the launch of HCQS in US.
CDMO sales growth was led by the commencement of the commercial
supply of four products, in addition to better traction in existing products.
The gross margin (GM) was up 410bp YoY to 54.2% on a superior product
mix.
The EBITDA margin expanded at a higher rate of 1,400bp YoY to 28.6%
(est.: 20%) on better GMs and controlled opex (as % of sales; employee
cost / other expenses down 310bp/620bp YoY).
EBITDA came in at INR2.8b (est.: INR1.7b), 3.5x YoY.
PAT grew almost 14x YoY to INR1.7b on strong sales growth, superior
margins, reduced interest outgo, and lower tax rate.
Based on growth visibility in Formulations as well as the API segment,
LAURUS is confident of sustaining the momentum in earnings.
HCQS sales reflected in Formulations/API are less than 5% of sales and GM
at the consolidated level.
Overall growth for the quarter was led largely by higher volume off-take.
Laurus has guided to clock revenues of INR13.5b in the ARV-API segment for
FY21, led by better off-take in Tenofovir, Lamivudine, and DTG and slower
decline in Efavirenz sales.
LAURUS would incur capex of INR3.5b for FY21 (spent INR910m in 1QFY21)
toward debottlenecking and brownfield expansions.
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
LAURUS IN
106
100.1 / 1.1
944 / 298
72/125/177
352
Financials & valuations (INR b)
Y/E MARCH
FY20 FY21E FY22E
Sales
28.3 41.4 47.1
EBITDA
5.6 11.5 12.7
Adj. PAT
2.6
6.9
7.5
EBIT Margin (%)
13.3 22.7 21.8
Cons. Adj. EPS (INR)
24.1 65.4 70.9
EPS Gr. (%)
132.6 170.9
8.5
BV/Sh. (INR)
172.5 231.3 295.1
Ratios
Net D:E
0.6
0.4
0.1
RoE (%)
15.1 32.4 27.0
RoCE (%)
12.3 23.7 21.7
Payout (%)
10.0 10.0 10.0
Valuations
P/E (x)
39.0 14.4 13.3
EV/EBITDA (x)
19.4
9.4
8.2
Div. Yield (%)
0.2
0.6
0.6
FCF Yield (%)
0.8
2.7
5.8
EV/Sales (x)
3.9
2.6
2.2
Strong beat on estimates
Shareholding pattern (%)
As On
Promoter
DII
FII
Others
Jun-20 Mar-20 Jun-19
32.1
32.0
32.8
8.8
31.6
32.2
16.1
11.3
12.4
43.0
25.1
22.6
Highlights from management commentary
FII includes depository receipts
Tushar Manudhane - Research Analyst
(Tushar.Manudhane@MotilalOswal.com)
Research Analyst: Hitakshi Chandrani
(Hitakshi.Chandrani@motilaloswal.com);
Bharat Hegde
(Bharat.Hegde@motilaloswal.com)
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.