Laurus Labs Limited Q1 FY23 Earnings Conference Call Insights

Key highlights from Laurus Labs Limited (LAURUSLABS) Q1 FY23 Earnings Concall

Management Update:

• LAURUSLABS said it expects the US filing pace to pick up in FY23. In new markets, the company validated two products as part of CMO opportunity and expects significant upside in FY23 from these products.

Q&A Highlights:

• Sudarshan Padmanabhan from JM Financial asked that on the formulation side, if the company is seeing the run rate moving ahead and when the capacity will be optimally utilized. Satyanarayana Chava CEO said that capacity is fully qualified now but will be fully utilized by end of CY22.

• Krish Mehta of Enam Holdings enquired about the breakup of ARV versus non-ARV sales for 1Q23. Satyanarayana Chava CEO replied that ARV APIs is at 25% of company sales and 17% of sales came from the ARV formulations. Summing it up, 42% of sales came from ARVs, API and formulations together.

• Amey Chalke with Haitong Securities asked that margin improvement in synthesis business has been minimal. Satyanarayana Chava CEO replied that there was price pressure on ARVs. The reduction in ARVs was offset by higher margin in CDMO business.

• Amey Chalke of Haitong Securities also asked about the higher other expense in 1Q23 vs. 4Q22. Ravi Kumar CFO said that on the expenses side, there is a power shortage in the company’s manufacturing area in Andhra. LAURUSLABS spent around INR33 crores additional expenses towards power. And some forex de-stated loss is also reflected in the other expense.

• Amey Chalke of Haitong Securities also asked if the company expects the other expense to normalize in the near term. Ravi Kumar CFO answered that the company expects the expense to normalize. This is in light of the power and fuel getting normalized already.

• Amey Chalke of Haitong Securities asked that if GM remains at similar level, does EBITDA margin have scope to improve. Ravi Kumar CFO replied that the company is reiterating the EBITDA margin guidance for FY23 of around 30%.

• Nikhil Mathur from HDFC Mutual Fund asked about the capex dedicated for the custom synthesis business in the INR2,000 crore.  Satyanarayana Chava CEO clarified the INR2,000 crore is for FY23-24. The company said 40-50% of the capex is in the CDMO space. The remaining INR1,000 crores is going into non-ARV API and formulations or backward integrations.

• Nikhil Mathur with HDFC Mutual Fund enquired about the revenue outlook for Laurus Bio for the next 2-3 years. Satyanarayana Chava CEO said the company did INR30 crore sales in 1Q23 and 2Q will be similar. In 3Q and 4Q, the company expects debottlenecking of downstream processing, which should increase revenues. For FY24, it should be flat for Bio.

• Tushar Manudhane of Motilal Oswal asked about the incremental operational cost associated with the new brownfield capacity. Satyanarayana Chava CEO replied that the company’s formulations expansion capacity is fully manned. Therefore, those expense are always built in in 1Q itself. If there is slight increase, it will be built in, in 2Q.