Laurus Labs Ltd - Uncertain outlook

A good company, going through a period of consolidation.

Company Overview

Laurus Labs is an Indian multinational pharmaceutical and biotechnology company headquartered in Hyderabad. Its focus areas include active pharmaceutical ingredients, generic formulations, custom synthesis, biotechnology. veterinary APIs and agro chemicals. The company was founded in 2005 by Dr. Satyanarayana Chava.

Share Details

• NSE:LAURUSLABS

• Closing Price = 365.30 (20-Jun-23)

• 52 Week High = 605.5. Trading at 40% below 52 wk high.

• 52 Week Low = 278.85. Trading at 31% above 52 wk low.

• P/E = 25

• Market Cap = 19,704 cr ( ~$ 2.4 billion)

Quality: Returns on capital employed in cash

LAURUSLABS is an efficiently run company as can be seen from the return ratios where both the ROE and ROCE average at 20%+ and the cash conversion is high.

Growth

Growth numbers are great. Both the bottom line and the top line are growing together. Generation of free cash flow is a negative for the company over a period of eleven financial years. The growth outlook is uncertain due to the completion of a large order.

The slow down in top-line and bottom line in the last two years along with a cautious sales outlook makes FY24 the year of consolidation.

So What????

If I own the stock, I may keep it based on my historic returns, future return expectations, and availability of alternative stock ideas

If I don’t own the stock, I will wait and see how the company navigates the year of consolidation in FY24. I will be unable to expect performance from the stock when the business is going through a phase of consolidation.

Disclaimer

• It is an analysis of the company data and not a stock recommendation

• My analysis can be completely wrong and can change the next minute based on changes in my understanding of the company

• I look to own good companies at prices where there is a path to market beating returns over decades