Laurus, Sai Life Sciences up 3% in weak market; what's driving CDMO stocks?

In the past one month, Laurus (up 14 per cent) and Sai Life (up 15 per cent) have outperformed the market by soaring up to 15 per cent

Share price of Laurus Labs, Sai Life Sciences

 

Share prices of Contract Development and Manufacturing Organization (CDMO) companies, Laurus Labs (₹1,237.90) and Sai Life Sciences (₹1,124), rallied 3 per cent on Friday and hit their respective new highs on the National Stock Exchange (NSE) in an otherwise weak market.  In comparison, the Nifty 50 was down 0.47 per cent at 77,477 at 11:11 AM.

 

In the past one month, Laurus Labs shares (up 14 per cent) and Sai Life shares (up 15 per cent) have outperformed the market by soaring up to 15 per cent as against a 8.9-per cent rise in the benchmark index.    Check here: Top Losers Today  | Top Gainers Today

 

 

What’s driving CDMO stocks' prices?

 

Laurus Labs is a research-driven pharmaceutical and biotechnology company committed to improving global health. It holds a leadership position in developing and manufacturing select Active Pharmaceutical Ingredients (APIs) and Finished Dosage Forms (FDF) across anti-retroviral, oncology, cardiovascular, and gastro therapeutics. The company offers end-to-end CDMO services, supporting innovators from early-stage development to commercial production.

 

Laurus Labs sustained strong operating performance for the Q4FY26. The company achieved revenue of ₹1,812 crore, representing a 5 per cent growth, and an Ebitda of ₹523 crore, representing 10 per cent growth over Q4FY25.  The Ebitda margin was strong at 28.9 per cent, supported by continuing operating leverage. Profit after tax stood at ₹281.9 crore, driven by a favourable product mix and strong operational performance. The revenue growth was mainly driven by significant growth in CDMO business, supported by Affordable Medicine portfolio, which is Generics.

 

Notably, Laurus' share of CDMO business has increased from 13 per cent (six years ago) to over 30 per cent right now. The contribution from ARV revenues has come down from 67 per cent to 41 per cent in the current financial year, while sustaining absolute sales and global leadership in HIV therapy.

 

 

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Brokerage views on Laurus Labs

 

Laurus Labs is strategically transitioning towards a CDMO-led model, targeting 50 per cent revenue contribution by FY29. Growth is expected across segments: Generics supported by ARV recovery, higher volumes, improved utilisation and oncology API scale-up, while CDMO growth will be driven by increased order inflows from large players, commercialisation and a focus on high-complexity offerings.  "The evolving product mix, with higher CDMO contribution, is anticipated to support margin expansion. However, profitability may see slower growth due to elevated capex," analysts at Choice Institutional Equities said with a ‘Add’ rating and a target price of ₹1,255 per share.

 

FY26 is the second consecutive year of strong Y-o-Y growth in CDMO revenue (49 per cent/38 per cent in FY25/FY26). While Laurus continues to benefit from development project/commercialized molecules, it continues to invest in API and fermentation capacity to sustain the growth momentum, said those at Motilal Oswal Financial Services.

 

The brokerage firm remains positive on Laurus on the back of continued investment across manufacturing capacities for CDMO as well as contracts in generics space; enhancing technology offerings to widen business prospects in CDMO segment; and controlled financial leverage.  It has a ‘Buy’ rating on the stock with a target price of ₹1,370 per share.

 

Sai Life ratings by ICRA 

 

According to rating agency ICRA, Sai Life has a strong financial profile, aided by a sustained and healthy growth in its revenues and profitability leading to robust cash flow generation. Its revenues have increased at a CAGR of 25 per cent between FY2022 and FY2025 and by 43 per cent in 9MFY2026 to ₹1,590.4 crore supported by growth across both the discovery and CDMO segments.  Moreover, Sai Life is expected to maintain a strong growth momentum over the near to medium term on the back of a healthy growth outlook for the industry, good product mix and deepening customer engagement.

 

"However, Sai Life's revenues are concentrated in the regulated markets considering the nature of the business, with exports contributing up to 99 per cent to the total revenues, primarily driven by companies in the US and Europe. This exposes the company to revenue risks arising from region-specific challenges," ICRA noted. 

 

Moreover, several global and domestic players are expanding their presence in contract research, leading to an increase in competition and pricing pressure for industry players.  But, Sai Life's healthy scale of operations, robust infrastructure, employee skillset, focus on compliance and safety, established client relationships and a relatively higher industry growth rate are likely to mitigate the competitive threats to an extent, the rating agency said.  Meanwhile, the meeting of the board of directors of the Sai Life is scheduled on May 14, 2026 to consider and approve audited financial results (standalone & consolidated) for the fourth quarter and year ended March 31, 2026.      ==============================================  Disclaimer: View and outlook shared on the stock belong to the respective brokerages and are not endorsed by Business Standard. Readers discretion is advised.