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Business News/ Markets / Stock Markets/  Laurus Labs share price falls 3% after weak Q1 results; Should you buy, sell or hold?
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Laurus Labs share price falls 3% after weak Q1 results; Should you buy, sell or hold?

Laurus Labs Q1 results were impacted by lower sales, operational deleverage and elevated expenses.

Jefferies said Laurus Labs missed estimates for the fourth consecutive quarter with EBITDA margin at a multi-quarter low due to weak revenue growth.Premium
Jefferies said Laurus Labs missed estimates for the fourth consecutive quarter with EBITDA margin at a multi-quarter low due to weak revenue growth.

Laurus Labs share price fell 3% in the trade on Friday after the company reported weak Q1 results impacted by lower sales, operational deleverage and elevated expenses. Laurus Labs shares fell as much as 2.99% to 333.50 apiece on the BSE.

Laurus Labs Q1 net profit on a consolidated basis fell 88.8% to 28.40 crore from 252.5 crore in the year-ago period.

The company’s revenue in the first quarter of FY24 declined 23.2% to 1,181.8 crore from 1,539 crore, YoY. 

Earnings before interest, taxes, depreciation and amortization (EBITDA) in Q1FY24 decreased 63.2% to 166.8 crore from 454 crore in the year-ago period. EBITDA margin contracted by 154 basis points (bps) to 14.1% from 29.5%, YoY.

“Performance mainly affected by operational deleverage, material drop in the CDMO business, price fall in ARV portfolio over last year," said V V Ravi Kumar, Executive Director & Chief Financial Officer, Laurus Labs.

CDMO is short for contract development and manufacturing organization.

Also Read: BPCL share price declines after Q1 results; what should investors do- buy or wait?

The company anticipates rebound from H2, with recovering revenue trend, positives from cost improvement programs and raw material price stabilisation. 

“Our future capex projects towards strengthening CDMO and Bio division is advancing as per schedule and Debt leverage position remains comfortable," Kumar added.

Global brokerage maintained an ‘Underperform’ rating on Laurus Labs with a target price of 250 per share.

Jefferies said the company missed estimates for the fourth consecutive quarter with EBITDA margin at a multi-quarter low due to weak revenue growth.

It believes that tepid base business growth and no big CDMO product should result in margin pressure.

Domestic brokerage Motilal Oswal Financial Services said that Laurus Labs reported lower-than-expected earnings for Q1FY24 primarily due to reduced traction in the formulation segment. 

The brokerage cut its earnings estimate by 6% and 3% for FY24 and FY25, factoring the adverse impact on the Non-ARV API business, gradual pick-up in the formulation business, and higher operational cost. 

It reiterated ‘Buy’ rating on the stock with a price target of 410 per share.

“We remain positive on Laurus Labs on the back of building blocks across different aspects within the CDMO segment, limited scope of price pressure in the ARV segment and adding customers/new products in the Non-ARV API/Formulation segment. 

Kotak Institutional Equities said Laurus Labs delivered a washout Q1FY24 with EBITDA margin at 14.1% sinking to a 19-quarter low leading to a huge 52% EBITDA miss on estimates. 

“Even as management stays optimistic and is guiding for a recovery hereon, the weakness in the core business over the past two years is certainly unsettling. With the Paxlovid boost gone, all eyes are on the core Synthesis uptick. With a slower-than-expected ramp-up so far, the ask rate in Synthesis is now pretty steep. In any case, the business mix is unlikely to pivot significantly toward Synthesis over the near term with ARV staying relevant at 32% of sales even in FY2026E," the brokerage house said.

It maintained its cautious stance and retained ‘Reduce’ call with a target price of 300 per share.

Antique Stock Broking also cut its revenue and EPS estimates by 3% and 6% respectively for FY25. It continues to maintain ‘Hold’ rating on the stock and cut the target price to 277 from 294 earlier, valuing the company at 23x P/E on FY25 earnings.

At 9:40 am, Laurus Labs share price was trading 0.96% lower at 340.50 apiece on the BSE. 

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Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.

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Published: 28 Jul 2023, 09:43 AM IST
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