Hi Vineet,
Since you are actively looking for strong counter views wrt Laurus, as somebody long Laurus, let me offer some:
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The focus on the $1Bn Dollar goal is unnecessary from an investment point of view. Its a short term goal and its achievement or lack thereof will only impact short term stock prices. I don’t know why Dr. Chava has fixated on this so much, but as long term investors, I simply won’t fret about 1Bn happening in FY23 or in FY24. I would want to evaluate what’s the realistic chance of Laurus hitting 2Bn dollars in 5 years.
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The biggest medium term risk for Laurus is significant decline in its oral ARV business before the other non-ARV, synthesis and Bio businesses are large enough. There’s been a lot of debate on that (Good discussions starting here). The jury is still out on that, but Laurus management’s strong commentary in last Qtr concall and presentation was that ARV injectables are not a threat in the near to medium term. One can do their own research and choose to believe the Management or otherwise. This, I feel, is the key thesis underpinning a long Laurus vs short Laurus position. So far, I am letting Dr. Chava guide my opinion on this and monitoring ARV revenues Q-o-Q to update my beliefs and check Dr. Chava’s walk-the-talk.
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Optionalities: Laurus, like Praj, has some key optionalities.
a. De-merger of synthesis business in a few years - The Synthesis business so far has been doing very well and there’s a genuine possibility of value creation via a de-merger sometime down the line.
b. Laurus Bio - Laurus Bio is not a Pharma subsidiary. Its stated focus is the lab meat market. Hence, its not in a crowded space and is likely in an industry which will see massive growth in the coming decade. -
Valuations: Assuming Laurus ends FY22 with an EPS of ~14.5, at current prices its available at below 40x PE. Even if one believes Laurus will only deliver 6000Cr topline in FY23, that still probably means an annual EPS of 20. At a reasonable PE multiple of 35, that’s a great return on current price. Even if it trades at 30x PE, you’re not losing money at current prices.
I guess it boils down to the horizon of investment that you have for Laurus. My horizon is at least 3 years from now and my average buy price is around INR 500 and I feel extremely comfortable in holding on to the position and tactically increasing it on price dumps. I will reconsider my position only if there is an adverse business trigger such as further ARV revenue collapse or an adverse FDA observation or something like that.