Laurus Labs Limited Q3 FY23 Earnings Conference Call Insights

Key highlights from Laurus Labs Limited (LAURUSLABS) Q3 FY23 Earnings Concall

Management Update:

• [00:03:57] LAURUSLABS said its strong results were driven by growth in non-ARV revenues, especially CDMO and API, and recovery in ARV formulations that is expected to continue further.

Q&A Highlights:

• [00:18:37] Sajal Kapoor asked about the anticipated commercial shipment time lines for all three new facilities currently under construction. Satyanarayana Chava CEO said that the construction of two CDMO facilities, one for animal health and the other for agrochemicals, is nearly complete. Once the new site is qualified, it will be available to global markets.

• [00:23:02] Bharath of Quest for Value enquired if the company still believes it can achieve the ARV business; API and formulation combined to be less than one-third by FY25. Satyanarayana Chava CEO answered that if all the diversification plans goes as per plan it is possible.

• [00:24:05] Bharath of Quest for Value asked about the company’s vision of doubling employees from 5,000 to 10,000 and revenue contribution per employee from INR1.2 crore to 2 crore per employee.  Satyanarayana Chava CEO answered that there was no timeline identified and also it’s difficult to give a timeframe of when it will be achieved.

• [00:26:03] Bharath of Quest for Value asked about the driver of sharp jump in active projects in CDMO. Satyanarayana Chava CEO replied that it was due to some awards for clinical supplies and the company expects this number to continue.

• [00:26:38] Bharath of Quest for Value enquired about API capacity increase and in which division this increased capacity will be used. Satyanarayana Chava CEO answered that most of the increased capacity will be used for non-ARVs and CDMO.

• [00:28:48] Nikhil Mathur from HDFC enquired about the formulation business declining by about 45% and how much of it is attributable to ARV and non-ARV. Satyanarayana Chava CEO said that about two-thirds is ARV and one-third is non-ARV.

• [00:29:20] Nikhil Mathur from HDFC asked about the reason for decline in non-ARV formulations. Satyanarayana Chava CEO said that the contribution from non-ARVs was about 20-25%. The revenue was less due to ARVs. In absolute terms there was no decline in non-ARV formulations.

• [00:32:49] Krish Mehta with Enam Holdings enquired about the absolute ARV revenue and ARV FDF for 3Q23. Satyanarayana Chava CEO answered that absolute ARVs was INR516 crores; INR376 crores for APIs and INR140 crores for formulations. And ARV FDF was INR140 crore.

• [00:41:11] Surya Patra at PhillipCapital enquired if there will be a good uptick in margins for 4Q23. Satyanarayana Chava CEO replied that this year it will be closer to 28%.

• [00:47:31] Anandha Padmanabhan of PGIM India queried about the visibility Laurus has based on contracts in hand in achieving the guidance of INR6,500 crores on a full year basis. Satyanarayana Chava CEO answered that the company is hopeful to meet that.

• [00:51:56] Nitin Agarwal with DAM Capital asked about the INR3,000 crore per annum guidance for ARV formulations and APIs, if it will exceed. Satyanarayana Chava CEO clarified it lowered its number to INR2,500 crores, both API and formulations. And for that, Laurus is on target.

• [00:54:18] Kunal Dhamesha with Macquarie asked about the global fund allocation, if the pricing would remain stable or it will be revised. Satyanarayana Chava CEO answered that prices are going to remain stable and don’t expect to go down further.

• [00:56:38] Jeevan Patwa with Sahasrar Capital enquired if the company will be able to maintain GM at the 54% and above level. Satyanarayana Chava CEO  replied that at present operational deleverage is happening. Once it’s over, the margins profile will improve.