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Business News/ Markets / Stock Markets/  Laurus Labs share price plunges 10% on disappointing Q3 earnings; Here's what brokerages say

Laurus Labs share price plunges 10% on disappointing Q3 earnings; Here's what brokerages say

Laurus Labs share results: Laurus Labs share price slumps 10% on lower-than-expected Q3 earnings. Laurus Labs reports 89% YoY fall in Q3 net profit to ₹23 crore.Brokerages give mixed recommendations for buying or selling Laurus Labs shares.

Laurus Labs share price opened at an intraday low of ₹358.70 apiece on BSE. (AP Photo/Lo Sai Hung)Premium
Laurus Labs share price opened at an intraday low of 358.70 apiece on BSE. (AP Photo/Lo Sai Hung)

Laurus Labs share price slumped 10% on Thursday's trading session following the company's release of lower-than-expected Q3 earnings. Brokerages indicate that Laurus Labs saw yet another quarter of subpar performance on several fronts, with a substantial miss on the Street estimates. Laurus Labs share price opened at an intraday low of 358.70 apiece on BSE

According to Rajesh Bhosale, Equity Technical and Derivative Analyst at Angel One, Laurus Labs stock prices have seen a gap-down opening and have almost tested their October month swing low around 350. From intraday lows, prices have bounced back; however, as of now, the trend remains weak and prices may face selling pressure at higher levels. 390 is immediate resistance, whereas 360 is support.

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Laurus Labs on Wednesday reported an 89% year-on-year fall in its consolidated net profit for the fiscal's third quarter ended December (Q3FY24) to 23 crore. The company had reported a profit of 203 crore in the year-ago period. Sequentially, the net profit was down 38%. 

The company's revenue stood at 1,195 crores during the quarter ended December from 1,545 crore in Q3FY23, a year-on-year fall of 23%. Sequentially, the growth was down by 2% from 1,224 crore in Q2FY24.

The company stated in its report that revenues fell 23% year over year, mostly as a result of base year's high CDMO and API revenues being offset by favourable FDF and Bio.

“During Q3 FY24, we achieved 1,195 crores in revenues, representing 23% decline. Excluding the large CDMO PO, the underlying revenue growth was 6% YoY. EBITDA stood at 183 crores, resulting to 15.3% margin. While Gross margins was healthy at 54.3% our EBIDTA margin has remain compressed due to higher spends on growth projects. 

We expect overall business momentum to pick, supported from healthy order book and execution on strategic manufacturing partnerships along with ongoing realisation of cost initiatives driving improvement in operational results," said V V Ravi Kumar, Executive Director & Chief Financial Officer of Laurus Labs. 

Additionally, the management stated that operating leverage would lift their margins above the 20% threshold in the upcoming fiscal year, reported CNBC TV 18. 

Should you buy or sell? 

Motilal Oswal Financial Services

The brokerage has reiterated a 'buy' call on the stock. The brokerage states that Laurus Labs will spend a total of 2,800 crore on capital expenditures in the CDMO, non-ARV formulation, and non-ARV API sectors throughout FY22–24. In addition, it is going through a validation phase for goods in the agricultural science and animal health segments, as well as capital expenditures.

“We cut our PAT estimates by 56%/30%/20% for FY24/FY25/FY26 factoring in: a gradual pick-up in animal health contracts, a delay in scale-up of Non-ARV formulation, and a moderation in pricing of the Non-ARV API products. We value Laurus at 25x 12M forward earnings to arrive at our target price of 440," said the brokerage.

Kotak Institutional Equities

The brokerage stated that it agrees that margins would increase going forward as Laurus adds more Synthesis and Bio projects. Because of increased utilisation and a larger Synthesis mix, they are also factoring in a rebound in EBITDA margins to 21%/23.7% in FY2025/26E.

“On account of the lower sales and higher finance costs, we cut EPS by 8-39% over FY2024-26E. On an implied basis, Laurus’ Synthesis segment is currently trading at a 50+% premium to Syngene (based on consensus EV/EBITDA), which is untenable, in our view. We roll forward and retain our SELL rating on Laurus with a FV of 285," the brokerage said. 

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

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Published: 25 Jan 2024, 10:47 AM IST
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