Laurus has completed the expansion for Lamivudine with its offtake expected to increase over the near term.
Laurus is looking to ramp up the commercial production of its anti-retroviral (ARV) products after (a) developing products, (b) spending considerable capex (INR4.2b) to build its formulation facility, and (c) filing products with institutional and regulatory agencies (for the LMIC-WHO/US/EU market) for its ARV products.
Post the receipt of approval from the USFDA, Laurus has received an order from Global Fund to supply Tenofovir-Lamivudine-Dolutegravir (TLD) as part of a 3.5-year agreement. Additionally, it also plans to participate in country-specific tenders and business from private companies. Further, Laurus is continuing to develop its product pipeline for the US market. It has filed 18 ANDAs till date with an intention to add ~8-10 ANDAs every year.
Till date, it has received four approvals; more approvals should come over the next 12-15 months. Accordingly, we expect its formulation business to increase 5x to INR2.5b (partly on low base) over FY19-21E.
While the superiority of other molecules like Dolutegravir would adversely impact the offtake of Efavirenz (a key molecule for Laurus), we expect this would be offset to a large extent by introducing newer molecules.
Laurus has completed the expansion for Lamivudine with its offtake expected to increase over the near term. Robust demand and cost competitiveness should enable Laurus to garner better business in the Tenofovir API as well. We expect 69% earnings CAGR over FY19-21E to Rs 26o crore. We value Laurus at 18x 12M forward earnings (to factor in forward integration and strong growth in earnings) and arrive at a target price of Rs 470. We resume a ‘buy’ rating on the stock (earlier ‘under review’).