Sharekhan Suggests Buying This Large Cap Pharma Stock For Likely 39% Return, Plans Rs. 2500 Cr Capex

Reputed brokerage firm Sharekhan has recommended investors to buy the stocks of Laurus. Laurus is in the midst of massive capex plans of Rs. 2000- Rs. 2500 crore spread over two years across segments.

Target Price, Current Market Price, and Company Performance

The Current Market Price (CMP) of Laurus is Rs. 528. Sharekhan has estimated a Target Price for the stock at Rs. 735. The stock has potential to give a 39% return, in the upcoming 1 year. This is a small-cap company with a market capitalization of around Rs. 38,629 crore.

Stock Outlook
Current Market Price (CMP)	Rs. 528
Target Price	Rs. 735
Potential 1 year return	39.00%
52 week high share price	Rs. 723.75
52 week low share price	Rs. 440.00

In FY22, Laurus Labs Limited (Laurus) has reported a robust growth outlook and has also highlighted key areas that the management intends to focus on. The company's sales in FY22 was recorded at Rs. 4935.6 crore, which is expected to be at Rs. 7053.5 crore in FY23. Their Operating Profits in FY22 stood at Rs. 1422.4 crore, which is expected to be at Rs. 2116.1 crore in FY 23. The company's PAT in FY22 was recorded at Rs. 832.2 crore, which is expected to be at Rs. 1254.2 crore in FY 23.

Sharekhan on the stock advantages and risks

Laurus in its Annual report has shared encouraging growth prospects, that are well-supported by capacity expansion plans and the management has retained its revenue guidance of $1 billion by FY2023. The recent trends suggest that freight costs are expected to normalize in the subsequent quarters as the container availability has been improving, thus pointing to likely easing of cost pressures, partially. The company eyes to strengthen the R&D, focusing on drugs going off patent and plans to invest 10% of profits towards disruptive technologies, which could enable the company to create a platform for sustained growth ahead.

According to Sharekhan, "Citing the strong demand environment, defined strategy for growth and massive capex plans provides comfort in the growth ahead. At CMP, the stock trades at 22.4x/17.2x its FY23E/FY24E EPS, which provides ample headroom for expansion basis the above." However, mentioning the key risk, the firm said, "Any delay in product approvals or any negative outcome of facility inspection by the USFDA can affect earnings prospects."

Company profile: Laurus

Laurus is a leading research-driven pharmaceutical company, working with nine of the world's top 10 generic pharmaceutical companies in the world. The company sells APIs in 56 countries. The company's major focus areas include anti-retroviral, Hepatitis C, and Oncology drugs. Oncology is one of its core competencies. Laurus has four distinct business units, namely: Generics API, Generics FDF, Ingredients and Synthesis. Laurus has cumulatively filed 30 ANDAs in the US with 14 PARA IV filings and 10 First to File opportunities. The company has initiated a brownfield expansion and expects to add significant capacity which should be operational by the beginning of 2022-23 and contribute to the topline growth. Additionally, Laurus has also filed 315 patents out of that 184 patents granted as of March 31, 2022.

Disclaimer

The above stock was picked from the brokerage report of Sharekhan. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.