Laurus Labs shares drop 3% despite 2nd straight quarterly beat; here're target prices

Laurus Labs shares tanked 3 per cent in Friday's trade, despite a strong set of March quarter results, led by strong traction in the Formulation segment. This was the second consecutive quarter of better-than-expected performance for Laurus Labs, which has seen three years of deteriorated earnings. A few stock analysts are still concerned over the legacy issues with anti-retroviral (ARV) segment. 

The stock fell 3.22 per cent to Rs 626.25 on BSE. Jefferies maintained its 'Underperform' on Laurus with a target of Rs 480, saying the management did not offer any concrete sales guidance for FY26. 

Laurus ended FY25 on a strong note, with 92 per cent YoY growth in PAT. But MOFSL noted that the long manufacturing lead times for CDMO projects and higher capex intensity not only impacted earnings but also affected overall return ratios over the past two years. 

"With improving asset utilisation driven by project execution in the CDMO segment and new launches in the FDF segment, we expect 18 per cent, 25 per cent/57 per cent CAGR in sales/Ebitda /PAT over FY25-27. Reiterate BUY on the stock," it said.

Antique Stock Broking said Laurus' CDMO business will be the primary growth driver, with the segment expected to maintain its upward trajectory into FY26. Overall, it anticipated that the enhanced utilisation of the CDMO capacities will lead to positive operating leverage, potentially improving the Ebitda margin to 26 per cent in FY27 from 19 per cent in FY25.

"However, concerns persist for the ARV segment, which still represents 46 per cent of FY25 and 34 per cent of estimated FY27 revenue. In a best-case scenario, this segment is expected to post flat revenue over FY25-27E. We continue with HOLD rating with a revised target of Rs 520 (previously Rs 398), valuing the company at 30 times PE on FY27 earnings," Antique said.

The target adjustment reflects Laurus' increasing contribution from higher growth and higher margin CDMO business segment compared to the legacy ARV segment, the brokerage said.

Arihant Capital Market said non-ARV formulations should pick up from Q3FY26 as new approvals kick in. Animal health CDMO will start contributing meaningfully by FY26-end, while crop sciences gains scale from FY27, it said. This brokerage noted that the company has lined up a capex of Rs 1,000 crore,  mostly in CDMO and formulations, but the debt likely to stay under control.