Analysts claim Laurus Labs' CDMO services are essential for better chances

Analysts claim Laurus Labs' CDMO services are essential for better chances

Laurus-labs

Sales of CDMOs fell 57% YoY to Rs 9.2 billion in FY24.

After the company's fourth-quarter performance, experts speculated that Laurus Labs' future may depend on its use of contract development and manufacturing organization (or CDMO) services.

Analysts at Kotak Securities said, "From 15.4 percent in FY2024, an important impact revival in its EBITDA margin hereon hinges on primarily a much-improved CDMO performance."

The Hyderabad-based Laurus Labs said on April 24 that its net profit for the March quarter dropped by 26% to Rs 76 crore from Rs 103 crore a year earlier. Revenue reached Rs 1,440 crore, up 4%.

As per the management, there is a continuous investment of $100 million on CDMO services. Beginning in FY25, supplies from animal health facilities will be available. By the end of FY25, establishments must be qualified for the crop protection segment's intermediate production.

Over the next several years, Laurus anticipates that CDMO services will account for one-third of revenues. Sales of CDMOs fell by 57% to Rs 922 crore in FY24. Due to a high base from the previous year's execution of a large purchase order, this occurred.

Laurus intends to submit new medication applications for two APIs (active pharmaceutical ingredients) shortly after completing their validation.

The corporation wants to broaden the scope of its projects and include more late-stage goods. But throughout the following year, prospective new CDMO customers won't contribute much in the way of sales.

The business has been concentrating on increasing capacity. Over FY22–24, it spent over Rs 2,600 crore in medicinal products/finished dosage forms (Rs 650 crore), API-CDMO combination (Rs 1,040 crore), and CDMO (Rs 900 crore).

Analysts at Kotak Securities said, "The company is experiencing delays in a few of its crucial CDMO projects, despite a gradual increase in macro tailwinds for its CDMO segment." "It's concerning that there is no visibility on any other commercial CDMO contracts, with the exception of the animal healthcare and crop science contracts in FY2026E."

Motilal Oswal analysts reduced their profit projection, seeing only a slow recovery in the CDMO market. They also took into account heightened competition in the API market and a delay in the clearance of new, shortened drugs.

Due to decreased CDMO sales, Jefferies analysts reduced the company's FY25 and FY26 expectations by 15% and 3%, respectively.

DAM Capital analysts, however, remained upbeat about the company's future. As revenue and capacity utilization increase, mostly due to higher margin non-anti retro viral/CDMO activities, they anticipate a strong increase in EBITDA and PAT starting in FY25.