Just sharing the latest results, investor presentation and concall.
https://www.bseindia.com/xml-data/corpfiling/AttachLive/58a8514d-9069-48e1-afdf-a14d70eb492c.pdf
https://www.bseindia.com/xml-data/corpfiling/AttachLive/4e755946-4a16-48a4-bfb4-4ffc5f5ac6e5.pdf
Hope you find it useful.
dr.vikas
Both children are now added to the board. I don’t have any strong opinion on this as new gen could bring in some fresh energy.
However, it stands out that family is now more in control of the business with promoter stake below 30%.
Within the CDMO segments for companies under our coverage, we expect robust yoy growth in
1QFY25, led by contribution from new projects, and factor in 71% yoy and 17% yoy CDMO sales growth, for DIVI’s and LAURUS, respectively.
I am sharing below SOIC video on Indian Pharma Value Chain
Here Laurus is discussed between 26 to 30 minutes on the time line
Not Invested
Am I the only one who has a feeling that doctor sahab mamu bna rhe hai?
I was going through the press release and found very funny comments. Funny because they make no sense. They are put there just to show off (maybe).
“We are leveraging power of our comprehensive technology platform & commercial excellence to advance manufacturing of several clinical programs and maximising the value impact of our integrated model.” (it seems jitni bhi English samaj aai, sab ek line me likh di).
Doctor sahab has been quoted saying momentum in CDMO business. Yet CDMO business is down by good 14%.
And then under CDMO business highlight, tone changes to “Soft growth on expected lines….”
In investor presentation for CDMO business, they have mentioned “Soft growth on expected lines driven by significant resource allocation towards delivering multiple high value complex programs”. So they allocated resources to high value complex business and the CDMO segment de-grew. Isn’t that a paradox?
Now they are saying H2 will be good. Since FY23 (when they were targeting to do $1bn topline), their goal post has always moved ahead by 2 quarters.
“Pricing dynamics across ARV product basket stable but a bit subdued for broader API portfolio”. If this sentence makes any sense, please do explain me.
Under FDF, they have signed a new customer. But obviously, business will only come after multiple quarters. Everything is in the future.
Bio division is “Continued positive market demand” and yet it de-grew by 14%.
Multiple projects coming up only in FY27. Like the one mentioned above for FDF. Large scale commercial fermentation capacity at Vizag coming up in FY27.
As you scroll down the investor presentation, you will notice how “H2 FY25” will change to “Q4 FY25” and “by end of FY25”. So, now the H2 targeted (better) performance is moved to year end.
On the positive side, atleast they are not playing the game of “adjusted EBIDTA”
Sarcasm aside, my point is what management is saying is completely different from what business is saying. In current euphoric market, one needs to tread with caution. Personally, I don’t see margin of safety in the valuation, nor is the management commentary comforting.
DIsclosure: Hold 5% of portfolio in LL. Will exit tomorrow and move to other API company where management has actually walked the talk in Q1 FY25.
The management’s ability to form positive narrative and bad results have remained constant since last 2 years. I went through same realization 2 years ago luckily and wrote how they miss on guidances Laurus Labs - Can Business Transform to Next Level? - #1018 by Simrat
Laurus Labs Q1FY25 Concall Highlights
Biosecure Act in the USA is a big benefit to Indian CDMO companies in the long run
Expect performance to pick up in H2
Gross Margin - 55% due to product mix, better pricing & process
Generic APIs had pricing pressure.
CAPEX - Animal health facility commercial validation going on. Agro facility will be commercialized end of FY25.R&D centre will be commissioned next month.
In the 2600cr Capex done already, 75% went towards CDMO facility.
CDMO – 70 active projects, 10 commercial projects. 5x increase in the scientist count in CDMO vertical in late-stage projects of big pharma which has high possibility of being successfully.
31 customer audits done in last year and half of them are CDMO. R2 facility is almost booked and R3 will come online in 24M, the fermentation facility with 200cr capex at R3 will come up by mid of 2026.
Oncology – New products validated at Vizag site and expecting regulatory approvals
FDF facility – 10 billion will be increased to 13billion in 18M
25% of facility is used for ARV currently
Krka JV – Expanded lines for oral solids in Vizag plant will go commercial in next 18M. Existing 2billion capacity given to them will be given additional 3billion capacity.
What sets me off about Laurus Labs?
In the quest of diversifying from an ARV-API focused company, the management has allocated capital all over the place. While the company has scaled CDMO and Generic-FDF business from INR 150 Crs and INR 6 Crs respectively to INR 922 Crs and INR 1,414 Crs during the FY18-24 period, the company has invested roughly around INR 4,000 Crs in putting up capacities. On top of that, the company has made inorganic investments in Richcore (Laurus Bio), JVs (KRKA), and new technologies like cell and gene therapies through ImmunoACT investments. The borrowing has gone up by 2.5x since FY18 as the operating cash flows are not able to fund the rapid expansion. The management talks about improving asset turnover from 0.8x to 1.1-1.2x but at the same time, they have announced INR 1,800-2,000 Crs of Capex for the next 2 years. The gross block is approximately INR 6,000 Crs and even if they manage to improve it to say 1.2x by FY26, that just translates to a 13-14% CAGR in 3 years. Bottom line, unless and until CDMO picks up substantially with large orders, the growth and margins are expected to remain stressed. This can go into a perennial loop of investing in the business as their focus is scattered with APIs, FDF, human health, animal health, crop science, fermentation, new technologies. There is always a new area to invest in. With this kind of reinvestment beyond what internal accruals can cover, free cash flows also remain a distant dream for this company.
To summarize, scattered capital allocation, debt-funded reinvestments, uncertainty around asset utilization, and lumpy revenues of CDMO with not-so-comforting valuations is how I look at this story as of now.
This is looking marvellous on the balance sheet.
But when will it convert into earnings in the big Q!!!
dr.vikas
Depreciation and Interest will eat away whatever they will make out out of Highlighted assets.
They Need to increase Revenue out of these assets and do it faster
An informative article discusses the US BIOSECURE Act and its effects on China’s CDMO industry. It highlights that Indian CDMO companies are set to gain, noting a substantial rise in interest and site visits from major pharmaceutical and biotech firms in India. It may take 2 to 3 years to play out this theme, but surely it will.
CDMO industry post BIOSECURE Act: who will take WuXi's place?.
Good thread on the CDMO opportunity
https://en.rattibha.com/thread/1834847045900996695
stock hasn’t corrected despite poor fundamentals. But technicals suggest the stock is about to breakout.
There is a lot of expectations and premium that’s driving the stock… also a ritual following I would say…
This September hopefully their packaging lines are done and some sales incremental can be done : one needs to be see however December and march are their strongest quarters…
