February 18, 2024
Laurus Labs Faces 10 Percent Share Price Slump Post Q3 Earnings Disappointment
Finance

Laurus Labs Faces 10 Percent Share Price Slump Post Q3 Earnings Disappointment

Laurus Labs Faces 10 Percent Share Price Slump Post Q3 Earnings Disappointment/AP

Laurus Labs Faces 10 Percent Share Price Slump Post Q3 Earnings Disappointment

Laurus Labs witnessed a significant 10% drop in its share price during Thursday’s trading session, triggered by the release of lower-than-expected Q3 earnings. Brokerages express concerns over the company’s subpar performance on multiple fronts, citing a substantial miss on Street estimates. The share price opened at an intraday low of ₹358.70 on BSE, indicating investor apprehension.

Q3 Financial Performance and Market Analysis

Laurus Labs reported an alarming 89% year-on-year fall in consolidated net profit for the fiscal’s third quarter, amounting to ₹23 crore. This substantial decline, both annually and sequentially, has raised concerns among investors. The company’s revenue also experienced a significant 23% year-on-year fall, attributed mainly to a decline in CDMO and API revenues offset by favorable FDF and Bio.

Management’s Response and Future Projections

V V Ravi Kumar, Executive Director & Chief Financial Officer of Laurus Labs, acknowledged the challenges but emphasized the underlying revenue growth of 6% YoY, excluding the large CDMO PO. The management anticipates a positive shift in business momentum, driven by a healthy order book and strategic manufacturing partnerships. Kumar stated that operating leverage would boost margins above the 20% threshold in the upcoming fiscal year, instilling confidence in the company’s future prospects.

Brokerage Perspectives: Buy or Sell?

Motilal Oswal Financial Services maintains a ‘buy’ call on Laurus Labs, expressing confidence in the company’s capital expenditures and growth projects. The brokerage acknowledges a cut in PAT estimates but values Laurus at 25x 12M forward earnings, setting a target price of ₹440.

On the contrary, Kotak Institutional Equities is cautious, emphasizing the premium valuation of Laurus’ Synthesis segment compared to Syngene. Despite expectations of increased margins, the brokerage retains a ‘SELL’ rating with a fair value of ₹285, factoring in lower sales and higher finance costs. Investors face a divergence of opinions, leaving them to assess the risk and potential rewards associated with Laurus Labs’ current market position.

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