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Motilal Oswal
Laurus Labs (Buy)
CMP: ₹547.15
Target: ₹651
In addition to strong base business of API (active pharmaceutical ingredients) manufacturing under Antiretrovirals (ARV) and Hepatitis C category, Laurus is forward integrating to formulations for regulated markets. With eight ANDAs (abbreviated new drug applications) filed, it is under process to take cumulative filing to 30 over next 2-3 years.
Accordingly, it has built manufacturing facility to drive US sales to ₹130 crore by FY20 from ₹2 crore in FY17. It is also forward integrating in ARVs for further improvement in profitability. Laurus has also leveraged its chemistry skills to drive synthesis/Ingredient business.
On overall basis, we expect Laurus to deliver 16.7 per cent CAGR in sales to ₹3,000 crore and 28 per cent CAGR in PAT to ₹400 crore FY20. We value Laurus at 18x 12M forward earnings to arrive at price target of ₹651 with an upside of 22 per cent. We initiate with a ‘Buy’.
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