Laurus Labs turns out to be one of investors' top pharma picks; gains 30 per cent in a month

Geyatee Deshpande
/ Categories: Trending, DSIJ Academy
Laurus Labs turns out to be one of investors' top pharma picks; gains 30 per cent in a month

Investors considered the stock of Laurus labs as a multibagger stock since it gained by around 295 per cent on a YTD basis. It made the scrip, one of the most favoured scrips by investors, in the pharmaceutical sector.

Sensex is down by 7.49 per cent on a YTD basis while BSE Healthcare index is up by 47.70 per cent on a YTD basis. Thus, outperforming both Sensex and BSE Healthcare index, Laurus Labs has been especially rewarding for those investors, who accumulated the company’s shares at the beginning of the year.

One of the most important business strategies that worked in favour of Laurus Lab, which is also the reason why the stock prices have more than tripled in 2020 alone, is the fact that Laurus Lab emerged as a complete pharma company from a mere API player in the antiretroviral space. The company explored other business areas such as contract research and manufacturing & finished dosage forms all along while continuing to make APIs for oncology, hypertension drugs, and diabetes.

For global pharma companies in the API segment, a need to diversify supplies out of China is expected to be extremely beneficial as was seen previously with businesses of speciality chemical companies reaching new highs.

Laurus Labs saw increased profitability with rising margins triggering earnings growth. For Q1FY21, the company reported a 76.97 per cent YoY increase in the net sales to Rs 974.32 crore while its net profit rose significantly to Rs 171.78 crore during Q1FY21 from Rs 15.10 crore gained in Q1FY20.

Recently on September 29, 2020, shares of Laurus Labs have been split pursuant to the board and shareholder approval granted for sub-division of shares in its meetings, with September 30, 2020, being the record date for the same. Post which, the shares of the company have been split in 1:5 ratio, wherein an equity share with and existing face value of Rs 10 has been sub-divided into five equity shares of Rs 2 face value each. The share price is changed to Rs 292 per share from Rs 1,460 per share. Some analysts believe that post stock split, the stock offers limited upside potential.

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