One thing I am still grappling with is how easily Laurus is able to diversify to non-ARV streams.Back in 2016,they had an 80%+ exposure to ARVs which has come down steadily in just 4 years.Amazingly,even in formulations management is very confident of repeating this feat.So what is the company offering that diversifying into non-ARV segments seems like a walk in the park? It’s like they press a button and it’s there.ARVs seem to be their strongest point but why are competitors giving up their market so easily or the opportunity is just so huge that any efficient player can come in and tap it? I am not clear about this yet.
Laurus reported amazing Q1 earnings and the best part is that there is no “one-off”.In fact,employee expenses could come down in a few quarters as the incentives related to Covid subside,helping the margins a bit more.As Hitesh bhai pointed out,company could end the year with 600-50cr.+ kind of PAT and even after the sharp run up,the valuations have now fallen back to reasonable levels.On the other hand,debt continues to be fairly high at 1100 cr.Company is in hyper growth phase so these things don’t attract attention.The good part is that you keep making a lot of cash flows which you can plow back into the business to increase capacities and keep up the growth rate.However,high growth rates are seldom sustainable so I would like them to have a leaner balance sheet.As @rupeshtatiya noted,Dr. Chava does seem too focused on growth to the point that he’s more interested in tapping the growth opportunities rather than reducing leverage.I would breathe easier if the debt reduced in absolute terms,even if we have to sacrifice a few basis points off the growth rate.
Disc.: Invested.Views are biased.