*Laurus Labs – Q3FY22 Concall Update – Nirmal Bang Sec.*
*Outlook – Positive*
*_ As indicated by the management in after Q2, Q3 also saw some operational related delays, however we expect it normalise from Q4. The overall outlook is positive. With the infrastructure in place, the management sounded confident of achieving its aspirational sales guidance of $1bn in FY23 implying robust growth next year_*
The stock is trading at 18.6x FY23E on our earnings
• Drag in ARV business is sharper than expected and appears to have bottomed and demand for ARV APIs and Formulations will improve from Q4 FY 22 onwards
• Prices of solvents and APIs were higher
• On track to aspiration sales target of $1bn in FY23, implying 24% CAGR for FY22 and FY23
• *FY22 EBITDA to be 30%* vs 9MFY22 29.6%
• Debt on books I Rs 1750 cr; expect it to reduce from next year onwards
• Capex 9MFY22 – Rs 750 cr
• *_Formulations – Q3FY22 revenues of Rs 373 cr (-13% yoy, -25% qoq)_*
o Impacted by lower demand in ARV segment due to stocking at channel partners. – Signs of demand stabilization visible from Q4 FY 22. Developed market sales were healthy supported by steady market share gain in existing portfolio
o Capacity expansion update: Brownfield capacity expansion at Unit 2 (to add 4bn units) is on track and expected to get commercialized by 1QFY23. We expect to double our FDF capacity to 10bn units in Apr’22
o 1 product dossier was filed in Developed markets in 3Q taking total filings to 8 products for 9MFY22
• *_APIs – Rs 424 cr revenues (-42% yoy, -20% qoq)_*
o APIs sales weak due to lower demand in ARV segment and continued de-stocking impact in ARV business - Continue to believe that this is transient and should subside from Q4 onwards
o Filed 4 DMFs (2 non ARVs) taking the total to 71
• *_Synthesis – Rev of Rs 207 cr (+63% yoy, +34% qoq)_*
o Expansion in CDMO capability on track to include new opportunities; continued confidence in strong outlook for FY 2022 & Beyond
o Sustained new client addition and increased business from existing customers
o Capacity expansion update: Commercialized LSPL unit 1 during Q1FY22. Greenfield investment to set up a dedicated R&D center in Hyderabad (FY23) and three manufacturing units in Vizag (FY24/25)
o *Aspirationally, the company is looking Synthesis business to contribute 25% of overall sales by FY25, implying huge growth from current base*
• *_Bio – Rs 25 cr revenues vs Rs 26 cr in Q2_*
o Scope for improvement in ensuing quarters. Demand outlook remains strong. Additional Capacities commissioned in Q3 taking the total operational capacity to 180KL as on Dec’21. Subsequent benefits of the full operational capacity to reflect from Q4 onwards. The capacity will be used for Developed markets supplies