Laurus Labs bets on CDMO biz, sees gross margins at 60%; Check price targets

Shares of Laurus Labs Ltd. opened lower on Friday, October 24, even after the company’s September quarter results came in above analyst expectations on most parameters.During the post-earnings conference call, the management guided for antiretroviral (ARV) sales of around ₹2,500 crore, with a possible variation of ±₹200 crore.

Gross margins are expected to remain around 60%, higher than the earlier guided range of 50-55%. The company also aims to improve its asset turnover ratio from the current 0.9 times to 1.1 times.

Management further indicated that margins are likely to improve as the business mix shifts towards small- and large-molecule contract development and manufacturing (CDMO) segments.Among brokerages, Jefferies has maintained an ‘Underperform’ rating on Laurus Labs but raised its target price to ₹700 per share.

The brokerage said the Q2 earnings beat was driven by stronger-than-expected performance in the ARV segment due to shipment timing. However, it maintained that the overall outlook for the ARV business remains muted.

CDMO sales remained steady, led by commercial supplies in the animal health segment.Laurus Labs also announced a capital expenditure plan of $600 million over the next eight years for a new site in Visakhapatnam (Vizag) and intends to invest in new modalities such as antibody-drug conjugates (ADC) and cell and gene therapy (CGT), indicating a long investment phase ahead.

Goldman Sachs has retained its ‘Sell’ rating on the stock but raised its target price to ₹775 from ₹750 earlier, citing rich valuations despite strong growth momentum.

Meanwhile, DAM Capital has a ‘Buy’ rating on Laurus Labs, with a target price of ₹1,083 per share. It mentioned another strong quarter, with EBITDA in line with its estimates but sharply ahead of consensus. CDMO traction remained healthy, while gross margins stood at a robust 60%.

The brokerage also said that a strong operating cash flow generation, aided by a reduction in net working capital, which helped lower net debt and leverage.

According to DAM Capital, the management remains optimistic, driven by the ongoing CDMO ramp-up, and reiterated its guidance of improving gross asset turnover over the next few quarters. Sustained gross margins should support further EBITDA margin expansion, it added.

Shares of Laurus Labs ended Thursday’s trading session 2.07% higher at ₹943. The stock was trading near its record high level of ₹944. Shares have surged 53% so far in 2025.