Shares of pharmaceutical and biotechnology firm Laurus Labs Ltd. are trading lower on Friday after the company's June quarter earnings.
In an analyst call on Thursday, the company told analysts that its profitability was hit due to lower demand and pricing in ARV (anti-retroviral) impacting sales.
Laurus Labs reported a 23.2 percent drop in its overall revenue for the June quarter, while its net profit was down 90 percent year-on-year.
The management said during the earnings call that the ARV demand has been firming up, which may translate into better revenue in the future. Laurus' non-ARV business is also likely to contribute to earnings from financial year 2025.
EBITDA margin for the quarter fell to a multi-quarter low of 14.1 percent, down for the fourth quarter in a row. The company is hopeful of the margins improving from this year's September quarter.
Laurus also clarified that it has no plans of carrying out a share buyback in the near-term. Net debt for the company is expected to rise in financial year 2024 but will decline from the elevated levels in financial year 2025.
Two out of four analysts who covered the stock expect up to 20 percent correction in the stock due to a challenging outlook, high valuations and weak Q1 results.
Analysts at InCRED recommended a ‘reduce’ rating on Laurus Labs and cut the price target to Rs 294, implying a potential downside of around 15 percent from Thursday’s close.
They mentioned that the June quarter was a washout, with a 35-40 percent miss on EBITDA against estimates. The brokerage also called Laurus' current valuation of 26 times financial year 2025 Earnings per Share, as rich.
Brokerage Antique have a ‘hold’ rating on Laurus Labs with a price target of Rs 277, suggesting a 20 percent correction in the stock price. Antique expects margins to continue to drift lower with the outlook remaining challenging.
Analysts at Jefferies have an 'underperform' rating on the stock with a price target of Rs 350 against current trading price of Rs 343.80. They mentioned that the company has no big CDMO product to fill the void left by high-margin Paxlovid, which is used in the treatment of Covid-19.
Analysts at Motilal Oswal Financial Services however expect up to 20 percent upside to Laurus Labs, saying that they remain positive on the back of limited scope of price pressure in the ARV segment.
The company has been adding customers and new products in the Non-ARV API/Formulation segment, they observed. MOSL has recommended a Buy call on the stock with a price target of Rs 410.
Shares of Laurus Labs are trading 1.5 percent lower at Rs 338.8. The stock is down 10 percent on a year-to-date basis.
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