Laurus Labs bounces 16% from day's low on heavy volumes

The company said its Q3FY22 results were impacted by lower sales of ARV, APIs and formulations due to stocking at channel partners and it expects improvement from January-March quarter (Q4).

Shares of Laurus Labs moved higher by 9 per cent to Rs 504.50, bouncing 16 per cent from their intra-day low on the BSE in Friday’s trade on the back of heavy volumes on a positive outlook.

At 02:43 pm, the stock was trading 8 per cent higher at Rs 501, after hitting a low of Rs 433 earlier in the day. The trading volumes on the counter jumped over two-fold with a combined 9.9 million equity shares having changed hands on the NSE and BSE. In comparison, the S&P BSE Sensex was up 0.17 per cent at 57,375 points.

The stock slipped 7 per cent in opening trade after the company's revenues fell 20 per cent year-on-year to Rs 1,029 crore in the December quarter (Q3FY22) due to an impact of continued stocking concern in anti-retroviral (ARV) business. Profit after tax was down 43.7 per cent YoY at Rs 153.70 crore.

The company said its Q3FY22 results were impacted by lower sales of ARV, active pharmaceutical ingredients (APIs) and formulations due to stocking at channel partners and it expects improvement from January-March quarter (Q4).

“Increase demand for ARV business witnessing commodity customers and formation sales from global multilateral agencies come from Q4 onwards. And we believe that the sluggishness is only transitory in nature and should be normal from – onwards,” Laurus Labs said in a conference call.

The company added that despite a tough environment,  it has demonstrated healthy gross margin expansion due to a better mix. Its earnings before interest tax and depreciation and amortization (EBITDA ) declined by 33 per cent to Rs 290 crore while EBITDA margins declined 535 bps to 27.7 per cent from last year mainly due to higher employee and other expenditure.

According to analysts, overall outlook remains positive with gradual improvement in demand and planned capacity expansions in portfolio based on complexity and scale.

"Results were a miss on all fronts for this quarter as drag in ARV business is sharper than expected and appears to have bottomed. In API, ARV specific impact should ease from Q4 with visible signs of demand stabilization while good traction for Other and Oncology API should help in gradual recovery. Steady market share gain in existing portfolio along with portfolio expansion remains key for recovery in Formulations. CRAMS business is on track to leverage new opportunities and extend services," said ICICI Securities in a note.

Despite today’s sharp up move, Laurus has underperformed the market by falling 20 per cent in the past six months, as against a 9 per cent rise in the S&P BSE Sensex. The stock had hit a record high of Rs 724 on August 12, 2021.