Laurus Labs is entering a strong growth cycle, analyst says projecting 18% upside

Brokerage firm B&K Securities has initiated coverage on Indian drugmaker Laurus Labs Ltd. B&K has a ‘Buy’ recommendation on the stock with a price target of ₹1,030, implying a potential upside of 18% from Monday’s (October 20) closing levels.In fact, the target is also 9% higher than Laurus Labs’ 52-week high of ₹944, which the stock hit on September 19.

The brokerage wrote in its note that Laurus Labs is well-positioned for a strong growth cycle led by its high-margin CDMO franchise, which has gradually emerged as the company’s key earnings driver.

The segment delivered a robust FY25 performance, with ₹1,370 crore in revenue (up over 49% year-on-year in small molecules), supported by more than 110 active programmes, increasing late-stage conversions, and strategic diversification into animal health and crop science.A majority of the ₹4,000 crore ($450 million) capex over the last five years has been directed toward CDMO capabilities in biocatalysis, fermentation and high-potent chemistry, with a further ₹2,000 crore ($232 million) earmarked for the next two years.

With the gradual scale-up in animal health and crop science supplies over FY26-FY28, the company is positioned for a sustained 40% revenue CAGR in the small molecule CDMO business over FY25-FY28E, the brokerage said.

As the sales mix progressively shifts toward this high-value segment, EBITDA margins are projected to expand from 19% in FY25 to 28% by FY28, driving a 51% CAGR in PAT over the same period.While the brokerage noted that its estimates capture known triggers, it said the strong capex programme provides additional growth opportunities beyond FY28 that are not yet factored into projections.

Complementing CDMO growth, the formulations (FDF) and non-ARV API businesses continue to provide a steady earnings base, the brokerage added.

Laurus’ differentiated investments in advanced technologies, oncology APIs, biocatalysis, fermentation, and cell & gene therapies reinforce its position as a diversified, innovation-led CDMO player.

Valuations are at elevated levels—on par with peers such as Divi’s Laboratories, Syngene, and Cohance, but seem justified given the strong, ongoing capex and visibility for future growth, the brokerage said.

At the current market price of ₹873 (market cap of $5.5 billion), the stock trades at 38.6x FY28E EPS of ₹22.6 per share.

Shares of Laurus Labs Ltd. settled 2.36% higher on Monday at ₹921. The stock has gained 50% so far in 2025.