Here are the Analysts Review & Recommendations of the IPO,
Aditya Birla Money said,
Laurus Labs is a leading API manufacturing company with strong presence in Anti-retro virals (ARVs) and Hepatitis C. Its standalone sales have grown at a CAGR of ~41% to ~` 17.8bn while profit has grown by a CAGR of ~61% to ~`1.3bn during FY12-FY16. Net funds received from the IPO would be used mainly for pre-payment of debt and other corporate purpose.
At the higher price band of Rs 428, the stock is valued at ~34x of its FY16 consolidated earnings, which we believe is reasonable considering its strong growth trajectory. Given its proven management background, significant expansion plans, strong R&D capabilities and process chemistry skills and opportunities present in the API/Formulations space, we recommend “Subscribe” on Laurus Labs IPO for long term investors as the Company is on the cusp of aggressive expansion, benefits of which can be seen in the medium to long term period.
Paras Bothra of Ashika Group Said,
Thus, considering its leadership position in APIs and generics, growth initiatives, strong R&D capabilities and process chemistry skills, regulatory complaint manufacturing capacities and long standing relationships with multi-national pharmaceutical companies, we recommend our investors to “SUBSCRIBE“ to the issue for medium to long term investment prospective.
Centrum Wealth's Research Analysts Abdulkader Puranwala and Siddharth Khemka said,
The company has a proven track record with revenue and net profit growing at 41% and 57% respectively over FY12-16 and margins of ~21% in FY16. At the higher end of the price band of Rs 428, the IPO is valued at 14.6x EV/EBITDA and 34.1x P/E on FY16 basis. The IPO seems to be expensive when compared to listed API players. However such valuation may be sustained owing to continuation in growth momentum, reduction in debt and successful integration into formulation space. Hence long-term investors comfortable with such valuation, may look at the issue.
K R Choksey Analyst Hemanshu Srivastava said,
We advise to SUBSCRIBE for the said IPO to reap long term benefits on account of a robust business model, healthy balance sheet, strong business prospects in terms of multiple levers in place for growth and ability of the management to leverage its capabilities in a bid to cultivate its business.
IndiaNivesh Capital has the following recommendation,
In our view IPO of Laurus is aggressively priced hence leaves little scope for further upside. We recommend investors to give a pass to the IPO & buy the stock post listing at a better valuation as we like the company’s business model/future strategy & remain impressed with past growth track record
Ajcon Global's Akash Jain told,
Private equity backed Company which increases our confidence on R&D capabilities and process chemistry skills, we recommend high risk investors to “SUBSCRIBE” the issue. However, client concentration risk and high receivables days may cap listing gains.
Angel Broking's Shrikant Akolkar said,
On FY2016’s PAT of `133.3cr, the issue, at its upper band, is priced at P/E of 32x which looks expensive. Accounting for FY2017E PAT, the valuation still looks high at P/E of 28x. We believe that this kind of valuation is commanded by domestic pharma companies who have branded formulations business, healthy product pipeline and strong return ratios. Considering Laurus’ 1) high client concentration, 2) low pricing power 3) asset heavy model and 4) high valuation, we rate this IPO as Neutral.
IDBI Capital Research Said,
At the price-band of Rs426-428, Laurus’s implied PER is 26.8x on FY16 EPS of Rs16. Post the recent correction in the overall sector, Laurus’s PER is higher than even Lupin (22x), Divi (24.6x). While the near term gains may be capped, we believe that Laurus provides a good investment opportunity in the long-term given its potential to outperform the sector growth.
IndSec's Milan Wadkar Said,
~60% of the revenue for Laurus comes from top 5 players, which creates a risk to the overall financial performance. This in turn could limit an improvement in the valuations. Apart from this, entrance into formulation business could result in diversification of revenue along with improvement in the operational performance, however we believe it could take at least 2yrs from now. Hence we recommend an AVOID rating on the issue and one could have a re-look at the same post listing from a longer term horizon.
