Pharma company Laurus Labs faced a 3% decline in share price during Friday’s trading session, following their weak Q1FY24 results. The company’s performance was negatively impacted by reduced sales, operational deleverage, and higher expenses. At the end of trading, Laurus Labs shares experienced a significant drop of 1.93%, reaching ₹337.25 per share on the NSE.
During Q1 of FY24, Laurus Labs’ consolidated net profit plummeted by 88.8% to ₹28.40 crore, down from ₹252.5 crore in the same period of the previous year. Moreover, the company’s revenue for the first quarter of FY24 saw a decline of 23.2%, reaching ₹1,181.8 crore, compared to ₹1,539 crore in the previous year.
The earnings before interest, taxes, depreciation, and amortization (EBITDA) for Q1FY24 also took a hit, decreasing by 63.2% to ₹166.8 crore from ₹454 crore in the corresponding period of the previous year. Consequently, the EBITDA margin contracted by 154 basis points (bps) to 14.1% from 29.5% YoY.
The management of Laurus Labs, attributed the performance challenges to operational deleverage, a substantial drop in the CDMO business, and price declines in the ARV portfolio compared to the previous year. CDMO stands for contract development and manufacturing organization.
Despite the challenging situation, Laurus Labs is optimistic about a rebound in the second half of the year. The company expects a recovering revenue trend, benefits from cost improvement initiatives, and stabilization of raw material prices. Moreover, the company is progressing with future capex projects to strengthen the CDMO and Bio division, while maintaining a comfortable debt leverage position.
However, various brokerage houses expressed concerns about Laurus Labs’ performance. Global brokerage maintained an ‘Underperform’ rating on the stock, setting a target price of ₹250 per share.
Domestic brokerage Motilal Oswal Financial Services reported that Laurus Labs’ earnings for Q1FY24 were lower than expected, mainly due to reduced traction in the formulation segment. They lowered their earnings estimate for FY24 and FY25 but maintained a ‘Buy’ rating on the stock with a price target of ₹410 per share.
Kotak Institutional Equities retained a ‘Reduce’ call on the stock with a target price of ₹300 per share.
Antique Stock Broking also maintained a ‘Hold’ rating on the stock while reducing the target price to ₹277 from ₹294, valuing the company at 23x P/E on FY25 earnings.