Laurus Labs rallies 6%, hits record high on heavy volume

Laurus Labs

Shares of Laurus Labs, on Tuesday, rallied 6 per cent and hit a record high of Rs 394.70 in intra-day trade on the BSE on the expectation of strong earnings growth. The counter has seen huge trading volumes with a combined 2.9 million equity shares changing hands in the first 25 minutes of trading.

The pharmaceutical company’s stock surpassed its previous high of Rs 386, touched on January 25, 2021. In the past six months, Laurus Labs has performed in line with the S&P BSE Sensex, which gained 25 per cent during the same period.

On March 23, the rating agency CARE Ratings reaffirmed the ratings assigned to the bank facilities of Laurus Labs with a change in outlook from ‘Stable’ to ‘Positive’ on account of significant improvement in the total operating income and profitability margins during April-December (9MFY21) driven by volume sales under Formulation Dosage Forms (FDF) and Generic Active Pharmaceuticals Limited (API) such as diabetes and cardiovascular, continued incremental demand from existing clientele in non-ARV (Anti-retroviral) segment, completion of strategic acquisitions to augment growth in formulation and synthesis division.

CARE believes that Laurus will continue to benefit over the medium term from its growing scale of operations owing to new products being launched enhanced capacities and strategic acquisitions in synthesis division leading to better profitability margins consequently better cash accruals resulting in favourable capital structure, debt coverage indicators and improved liquidity.

Meanwhile, analysts at ICICI Securities have a ‘buy’ rating on Laurus Labs with a target price of Rs 440 per share as the brokerage firm believes that besides continuous improvement in the financial performances, the company is evolving as a strong vertically integrated player with strong order book visibility, improving margin profile, strengthening return ratios and healthy free cash flow (FCF) generation.

Laurus is well poised to follow the success story of some leading contract development and manufacturing organization (CDMO) players backed by strong chemistry and integrated model. Elsewhere, formulations are expected to grow amid ramp up and new launches (e.g. TLE400) in LMIC (low and middle-income country) and launches in the US. Other APIs are expected to be driven by a strong order book and capacity addition, it said.