1. Company & Business Strength: 10/10
Lauras Labs is an Indian pharma and biotech company headquartered in Hyderabad, with its 8 manufacturing plants located in Hyderabad, Bengaluru & Visakhapatnam. It also has R&D centers based in Hyderabad, Visakhapatnam & USA.
Its focus area includes pharma ingredients, biotechnology, synthesis, and finished dosage forms. The company operates through its subsidiaries in Europe and the United States and offers its services in contract research, clinical research, and analytical research through its R&D centers.
Laura's labs have been the biggest beneficiary of China plus one and the Aatmanirbhar Bharat initiative.
The company is also focusing on forward integration to manufacture finished products too in the house.
It has been contracting manufacturing for other pharma giants and has 200+ customers which quality products.
Lauras has also now increased patents to around 280+ & has bought acquisitions.
Business Segment:
Lauras Generic API:
Development, Manufacturing, and sale of APIs.
Revenue contribution of 55%.
Anti-retrovirals contributed most of the sales around 75+%.
Lauras Generic- Finished Dosage Form(FDF):
Use in-house API to manufacture Finished products, resulting in high margins and reducing costs.
Revenue contribution of 35%.
Lauras Synthesis:
Engages in Contract development & manufacturing.
Revenue contribution of 10%.
Laura's labs claim to be the "Worlds largest third-party API supplier for antiretrovirals" and have one of the largest HiPotent API capacities in India.
It also engaged in medication for HIV/AIDS named Dolutegravir/lamivudine/tenofovir.
It is also engaged in medication of Oncology(Cancer), Cardiovascular, Anti-diabetic, anti-asthma, & Gastroenterology.
The company also makes Hydroxychloroquine tablets for certain types of malaria.
During the Pandemic 2020, the company also announced a Hydroxychloroquine supply for Covid prevention.
2. Competitive Strength: 7/10
Lauras is an Indian Pharma company, it has competition with other giants like Sun Pharma, Divis Labs, Lupin, IPCA Labs, Alembic, Dr. Reddy, Aarti drugs, Aurobindo, and others.
It has also multinational competitors like Abbott, Sanofi, GSK, Pfizer, AstraZeneca, PGHL, and others.
Pharma sector has always been highly competitive and with a lot of regulations.
3. Stock Analysis Return & PE Ratio: 10/10
Lauras Stock is listed both in NSE, and BSE and currently trading around 550 (Jan 2022), with 52 highs of 720s and lows of 330s.
It has a market cap of 28000+ which is Midcap, Stock has been consolidating for a long time up to 2020 and has given a big breakup after the pandemic due to exceptional growth.
The stock has given a 3-year CAGR of 92% which is exceptional.
The face value is 2, so expect split, bonus, and buybacks.
PE Ratio: Lauras has a PE of 29 currently which is good compared to sector PE.
4. Dividend: 7/10
The stock has been giving a fair dividend of 0.38%. Generally, we expect a growing company to give atleast 1% dividend which is a good gesture and sign unless high Capex is planned.
Financial Ratios:
5. Sales Growth/Revenue: 10/10
The Sales growth indicates that the company can capture the market, and which may increase profitability.
Lauras Labs has a 3-year median Sales growth of 33% which is exceptional. Current year (2021) growth stands at 70.47%. For Mid caps, we consider the growth of atleast 15%+ as healthy sales.
6. Profit Growth: 10/10
Sales growth indicates a good income, but unless profit is not made it's terrible. Profit growth indicates how expenses are managed or also how the company has pushed the raw material prices to end customers.
Lauras Labs Profit growth stands at a 3-year median of 76.75% which is exceptional, Current year stands at 258.03%. For Midcap, atleast 20%+ is considered healthy growth in Profitability.
7. [ROE] & [ROCE] %: 10/10
Return on Equity:
ROE indicates the ability to generate profits from shareholders/Equity Investments. Lauras Labs ROE has a 3-year median of 21.4%. The current year stands at 42.32%.
We consider a healthy ROE to be atleast 20% for growth companies.
Return on Capital Employed:
ROCE indicates the ability to use its capital employed for business. Lauras Labs ROE has a 3-year median of 20.4%. The current year stands at 38.6%.
We consider a healthy ROCE to be atleast 20% for growth companies.
8. Debt/Equity: 6/10
D/E is a measure of which a company is running through debts vs owned funds. Ideally, D/E should be less than 1, which indicates stability.
Lauras Labs has a D/E of 0.55 which is still not a good sign. Unless capital expansion or any other is required, a low debt is always good to maintain profitability.
We consider debt-free or D/E<0.1 to be healthy.
Note: The debt has been decreasing in the last 3 years.
9. Shareholding %: 7/10
The company has a Promotor holding of 27.3%. The FII and DII of 22.78% and 4.85% indicate it is in strong hands. The remaining are for the Public.
Note: The Promoter Pledging % is 0% which is good, generally no pledging indicates a good sign.
Another indicator like interest coverage ratio, Return on Assets[ROA], and others also seems good.
10. Future Prospects: 9/10
Pros:
India is expected to have high healthcare growth in the future, especially after the pandemic. Also, people in rural areas are conscious of their health now.
High demand for these medications, due to an increased surge in diseases like heart issues, cancer, HIV/Aids, and others.
High research expenditure and manufacturing of in-house finished products for low cost & high margin.
China plus one or Aatmanirbhar Advantage.
The Financial ratios have been very good in most aspects except D/E. The stock has given exceptional returns for the last 3 years and has been a multi-bagger.
A good dividend is given by the company.
Cons:
The Debt is a bit high which is a concern for the future.
Promotor holding is a bit less and has been decreasing for the last 3 years.
Investment Hacks Score Card:
The average score of Lauras Labs based on all factors comes to be 8.6/10.
Conclusion:
Overall Laura's labs seem to have solid Management, research facilities, and Exceptional growth. The stock has given multifold returns to shareholders from listing. Since this is Mid cap stock, Investors can see volatility in the future and should carefully watch future plans and growth.
Disclaimer:
Since this is an educated opinion, Please research thoroughly or consult your financial advisor before Investment.
Hope you found this analysis useful. please share this with others if you found this useful. Please wait for other stocks/crypto analyses which will be available soon!.
Happy Investing!.
Team Investment Hacks
Comments
Post a Comment