 "Laurus gains 15% in 2 days on robust CDMO outlook; updates on AIDS drug biz")
Laurus Labs share price: Shares of Laurus Labs rallied 7 per cent to Rs 585.65 on the BSE in Thursday’s intra-day trade amid heavy volumes on a positive outlook for its contract development and manufacturing organisation (CDMO) business. In two days, the stock of the pharmaceutical company has surged 15 per cent. It had hit a 52-week high of Rs 619.50 on January 7, 2025.
Meanwhile, according to media reports, US President Donald Trump has frozen the President's Emergency Plan for AIDS Relief (PEPFAR) funding programmes for at least 90 days pending further review. Following that, Laurus clarified that the overall anti-retro viral (ARV) medicine market size is approximately $1.5 billion, which represents 10 per cent of the total HIV financing budget annually.
"Overall AIDS funding is from respective country Governments, PEPFAR, and the Global fund. Global agencies have worked well so far and controlled the pandemic disease of AIDS. If at all there may be a funding challenge, the Company reasonably believes it will not affect the procurement of medications," the company said.
Reports also suggested that the US has again decided to join back the World Health Organisation (WHO) yesterday. Based on the above, the company reasonably believes there will not be a significant impact on the business.
Meanwhile, the broader outlook for the CDMO industry with small molecules is positive, and the management remains committed to its 2025 growth outlook, supported by scheduled project deliveries for a few latest age projects in the March 2025 quarter (Q4FY25). The management said they are working on over 90 active projects, mostly in human health and also some in the Animal health and Crop Protection as well.
In the generic active pharmaceutical ingredients (APIs) segment, Laurus reported a decline in revenues for the December quarter (Q3FY25), mainly due to lower volume uptake in ARV APIs. The soft ARV performance was essentially due to prioritised capacity allocations towards high-yielding long-term business opportunities. Having said that, the management reassures that the company’s order book in ARV is healthy and Laurus will fulfill all confirmed orders and contractual obligations.
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The company delivered a strong performance in Q3FY25, driven by a robust growth in its Custom Synthesis and Generic finished dosage form (FDF) segments. Custom Synthesis stood out as a key growth driver, benefiting from high demand, improved operational efficiencies, and a strategic shift towards high-value and complex molecules. The company achieved notable improvements in profitability, driven by a better product mix, process efficiencies, and operating leverage.
Analysts at KRChoksey Shares & Securities, have increased the company's FY26E/FY27E EPS estimates by 0.6 per cent and 5.0 per cent to Rs 13.5/Rs 19.6, respectively, showing confidence that Laurus’s strategic focus on advanced intermediates and APIs, coupled with several R&D launches are expected to drive growth in the medium term. Apart from that, late-stage projects and a shift towards advanced manufacturing capabilities indicate a solid long-term growth trajectory. The brokerage maintains an ‘accumulate’ rating with a target price of Rs 687 per share for the company.
Brokerage firm Choice Broking, meanwhile, anticipates Laurus Labs to benefit from the expansion in its CDMO and Bio segments, driving growth. "While the API segment continues to face sluggishness, we expect normalization post FY26. Although the API segment has seen a declining trend, management anticipates recovery from FY26 as positive order bookings convert to sales," , the brokerage firm said in the company's results update. Meanwhile, the formulation segment's robust order book is expected to deliver sustained growth in the coming years, it added.