Financial Results Highlights: Laurus Share Price
Gross operating revenue stood at 1279 crores rising 31% YOY from 974 crores & declining 9% QOQ because of better product mix, gross margin improvement
Expenses stood at 886 crores rising 27% YOY but declining 6% QOQ
EBITDA stood at 401 crores rising YOY 40% but declining QOQ 16%
EBITDA margin stood at 31% rising 2% YOY but declining 3% QOQ because of increased R&D expenditure & pre-operative expenses
Interest Payments stood at 27 crores rising 80% YOY and 22% QOQ due to forex difference & additional borrowings in current quarter
PAT stood at 241 crores rising 40% YOY but declining 19% QOQ
PAT margin stood at 19% rising 1% YOY but declined 2% QOQ
R&D Spends came at ₹ 49 Cr (3.8% to Sales) and was up 17% YoY with 66 products being under pipeline
ROCE stood at 32.6% which was almost flat YOY but declined around 8% QOQ
Net Leverage stood at 1x from 0.9x YOY
Asset turnover of the company is 1.4 as per the management
Business Highlights: Laurus Lab Results
Revenue Mix: Formulations Business :41%, API: 43%, Synthesis: 15%, Bio: 1%
Formulation (FDF): Laurus Lab Value Research
Revenue 521 crores. The highest ever revenue Segment recorded strong growth at +48% YoY & 21% QoQ. Key drivers demand in ARV segment for Low to Middle Income region and portfolio expansion in Developed markets. Contribution to revenue rising steadily from this segment.
Tender contracts which were supposed to expire this year have been extended for a year due to pandemic
Product Filing Progress:
Canada:10 Approved & 5 Pending
European Union: 5 Approved & 6 Pending
US: 18 Approved & 10 Pending
Rest of the World: 22 Approved & 7 Pending
Capacity expansion update: 1) Debottlenecking Project completed during Q1 – expected to add 20% of the current capacity and 2) further Formulation’s capacity expansion at Unit 2 (to add 4bn units) is expected to get commercialized by Q4FY22 with 1 billion to be used for CMO & remaining for Non-ARV. Together these would double formulations capacity to 10bn units.
Currently capacity utilization stands at 80%
Q1 Global filings: 5 products filed for Developed markets vs 8 filed in FY 21
R&D: 20% of the pending products are from ARV while 80% are from non-ARV as company is focusing on diversifying its portfolio
APIs:
Revenue: 549 crores. Segment recorded 5% growth YoY. Healthy growth in Oncology (+16% YoY) and ARV segments (+23%) partially offset sluggish growth in Other APIs sales (-43%). Sequentially decline is ARV business is in line (off high base) due to demand normalization. Growth in Other APIs expected from Q2FY22 by the management. Company is expected to enhance total reactor volume from ~4600KL to 5600KL by the end of FY23. Company comes in top 5 in reactor volume capacities
Synthesis:
Revenue: 195 crores. Segment retained its significant growth momentum (+95% YoY) led by sustained new client addition and increased business from existing customers. Commercial supplies on-going for 4 products. Total Number of Active Projects in the CDMO division stood at the end Q1 was 50 vs 50 in FY21. Supplies to Astral Ceradyene & custom ingredients form 40% of revenue in Q1 for CDMO
Capacity expansion update in Synthesis: The company has commercialized LSPL unit 1 during Q1FY22. Proposed Greenfield investment to set up a dedicated R&D center in Hyderabad (FY23) and two manufacturing units in Vizag (FY23/24) under LSPL is progressing as per company’s expectations
Biologics:
Revenue: 14 crores. The segment reported ₹14.4cr in Sales. Major benefits from new fermentation capacity in recombinant Food protein segment to kickstart from Q2. Demand outlook remains strong in future as well from management.
Capacity Expansion in Bio: Commissioned partially additional (180KL) fermentation capacity (in Food proteins) for Developed markets. Expect full benefit of ramp up from Q2 onwards
Other Highlights: Laurus Lab Q1 Results
As per S&P global Crisil Ranking in ESG, company’s overall rank is 56 whereas highest & median score in pharma being 65 & 52 respectively, which makes company’s score better than industry average
Business Integration with Parent well on track as per the management
The company plans to acquire additional land for further expansion by creating close to 1 million liters fermentation capacity in Phase 1
The company is seeing growth in developed markets in North America & EU in Formulations Business
2 ANDA have been filed during current Quarter. Cumulative Total 28 ANDA with US FDA, 9 Filed Approvals & 9 Tentative. 5 DMF have also been filed taking the cumulative total to 66
The company has invested 213 crores in Q1 with expected 1500 to 1700 crores in FY 2022 & FY 2023 cumulatively with formulation to contribute 400 crores & CDMO capex is around 500 crores
As per the company, it is more independent in formulations business but dependent on partners for API business
Not all the ARV players don’t have an integrated therapy offering, therefore company is developing ANDA to capture markets in LMIC as well as in Europe & US
As per the company ARV business in API & Formulations revenue will come down from 2/3 to 1/3 by 2025 due to better product diversification
Entire ARV formulation market is 1.5 to 1.8 billion & company contributes to 33% of overall business to the business & company plans to gain future market share marginally in this business due to consolidation only. Therefore, company plans to diverse to non-ARV non oncology business
The company has no plans for reduction of debt as capex plans hold more relevance for the company
Capacity utilization: 20% for CDMO, 40% for ARV & 40% goes to Non-ARV Formulations
Outlook for Future Years: Laurus Lab Technical Analysis
Formulations
Renewed market share gains in ARV portfolio in LMIC
Market share growth in US launched products & create differentiated generic pipeline for the developed markets (US/EU) backed by in-house API strength
Product launches in anti-diabetic (FY23) & CV portfolio (FY24) in US market
API
Oncology: Strengthen global leadership in existing products by focusing on high potent molecules
Other APIs: Robust order-book in Anti-diabetic, CV & PPI, Brownfield capacity addition (FY23)
ARV APIs: Modest outlook overall while 2nd line API should see healthy growth. Maintain leading market share in the current product line and increased developed market supplies
Synthesis
Momentum to sustain supported by increasing commercialization of products. Well-positioned to meet fast-growing global demand for NCE Drug substance and Drug Products
Deepen existing relationships by taking higher wallet share & engage new clients
Setting-up dedicated R&D center & Greenfield manufacturing unit (operational FY23 end)
Leverage process chemistry skills to strengthen presence in nutraceutical & cosmeceutical area
Biologics
Expand the biologics CDMO at scale
Commercial Scale-up of the new fermentation capacity added in June’21 (Food Proteins)
Leveraging Parent’s existing Global Partnership and strong chemistry skills
Plan to acquire additional land for creating 1 mn liters fermentation capacity
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