Laurus Labs Ltd - Research Report


Private Client Research




Pharmaceuticals & Drugs


Laurus Labs Ltd

Reco Price
Rs. 545.00
Price Target (1.5 - 2 Years)
Rs. 1090.00


May 04, 2017
CNX Nifty




High R&D spends with various growth triggers can lead to operational efficiency.

High R&D spends leads to global volume leadership in key products:
Laurus is a leading generics API company, particularly strong in the ARV and Hep-C segments, where it is a global volume leader in key products. The company has demonstrated the ability to create global volume leadership in several key products. Laurus' R&D spend (5% of sales) is higher than that for most of its API peers and has been a key factor behind its success. Around 25% of the company's total employee strength is employed in the R&D function. Laurus has been successful in developing several new, innovative processes for many products (for eg. Efavirenz, Tenofovir) that lead to greater efficiencies and lower cost, in turn enhancing its market position.

Moving up the value chain could bring operational leverage:
Laurus has invested heavily in its manufacturing capacity, R&D to support its efforts to move up the value chain into formulations as well as to extend its API franchise to developed markets. For instance, company incurred 5% its of sales on formulations (R&D spend, overheads on already commissioned facility). This should be a significant source of operating leverage once revenues kick in.

Preferred vendor to source formulation driven drugs to major companies:
Laurus Labs’ unique position as a preferred supplier of APIs to several major participants of the tender-driven ARV market insulates it from the wins and losses of customers and significantly hedges the company against revenue volatility. It supplies ARV APIs to all major producers of formulations, including those having their own API manufacturing capabilities. It also supplies APIs to four of the top five winners in the South Africa tender market.

Various growth triggers:
Expansion in Low and middle income countries, supply in regulated market, first mover advantage in Hepatitis C, long term agreements with Gilead and Natco, oncology API’s which is largely focused on US and Europe, forward integration into formulations are certain strategies which is done by company which could bring the next leg of growth for the company.

Stock Data

CMP (Rs)
Face value (Rs)
52 Week Range (Rs)
585.00 - 452.20
Market cap (Rs Crores)
Price To Book Value (x)
P/E Ratio (x)

One Year indexed Stock Performance

Laurus Labs LtdSensex
Laurus Labs Ltd
Performance (%)


(in %)

+91 22 6639 3000



India is one among the top five pharmaceutical emerging markets globally and is a front runner in a wide range of specialties involving manufacturing and development of complex drugs. India has about 40% of all Abbreviated New Drug Application (ANDA) approvals from US FDA. The Indian API manufacturing industry is the third largest in the world, producing over 400 APIs. Globally Indian companies hold more than 90% of APIs approvals for ARVs, Anti-Tuberculosis and Anti-malarials.


LaurusLabs Ltd. is a leading generics API company, particularly strong in the ARV and Hep-C segments, where it is a global volume leader in key products such as Efavirenz, Tenofovir, Emtricitabine, Gemcitabine and Sofosbuvir. It also has a growing synthesis business and has invested significantly over the last two years in integrating forward into formulations.

Profit & Loss Statement:- (Consolidated)
(Rs Crores)
Mar 14
Mar 15
Mar 16
Mar 17
Mar 18E
  • Net Sales
  • Growth (%)
  • Total Expenditure
  • % Margin
  • Other Income
  • Operating Profit
  • Interest
  • PBDT
  • Depreciation
  • Profit Before Taxation & Exceptional Items
  • Exceptional Income / Expenses
  • Tax
  • Profit After Tax
  • Share of Associates
  • Consolidated Net Profit
  • Adjusted EPS
  • 1159.72
  • -
  • 956.09
  • 203.63
  • 17.56
  • 8.82
  • 212.45
  • 58.17
  • 154.28
  • 32.88
  • 121.40
  • 0.00
  • 23.64
  • 97.76
  • 0.00
  • 97.76
  • 9.24
  • 1326.59
  • 14.39
  • 1131.46
  • 195.13
  • 14.71
  • 34.07
  • 229.20
  • 101.11
  • 128.09
  • 61.53
  • 66.56
  • 0.00
  • -1.55
  • 68.11
  • 0.00
  • 68.11
  • 6.43
  • 1783.77
  • 34.46
  • 1416.71
  • 367.06
  • 20.58
  • 7.59
  • 374.65
  • 114.91
  • 259.74
  • 92.19
  • 167.55
  • 0.00
  • 34.51
  • 133.04
  • 0.00
  • 133.04
  • 12.57
  • 2140.52
  • 20.00
  • 1691.01
  • 449.51
  • 21.00
  • 7.59
  • 457.10
  • 130.00
  • 327.10
  • 110.00
  • 217.10
  • 0.00
  • 45.59
  • 171.51
  • 0.00
  • 171.51
  • 16.20
  • 2568.63
  • 20.00
  • 1990.69
  • 577.94
  • 22.50
  • 7.59
  • 585.53
  • 145.00
  • 440.53
  • 118.00
  • 322.53
  • 0.00
  • 67.73
  • 254.80
  • 0.00
  • 254.80
  • 24.07
Source: Stockaxis Research, Company Data


At CMP of Rs 545 the company is trading at 22.6x its FY18E earnings. With many growth triggers and strategies by company there could be operational efficiency which will lead to margin expansion and hence more earning per share. We hence value the company at 45x its FY18 earnings with target of Rs 1090.



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