Trump Reign: Laurus Labs Plunges 16.84 per cent Despite Stellar Q3 Earnings

U.S. Foreign Aid Concerns Overshadow Strong Financial Performance

Shares of Laurus Labs Ltd tanked 16.84 per cent on January 27, 2025, touching day's low of Rs 501.15 and erasing all gains from the previous session. The stock had climbed 5.5 per cent over two days, driven by strong Q3 results, but concerns over U.S. foreign aid policies reversed the momentum. Media reports indicated a halt in funding for the President's Emergency Plan for AIDS Relief (PEPFAR), which could disrupt anti-viral medication (ARV) supplies for millions globally.

U.S. Policy Shift: A Key Catalyst
PEPFAR, launched under the George W. Bush administration, has saved millions of lives by providing ARVs across 55 countries. However, a 90-day review of U.S. foreign aid programs, initiated by President Donald Trump, has paused aid with limited exceptions. This policy shift directly impacts global ARV supply chains, raising concerns for Laurus Labs' API business.

Q3 FY25 Performance: Bright Spots Amidst Uncertainty
Despite external challenges, Laurus Labs delivered robust financial performance in Q3 FY25:

• Revenue Growth: Total revenue rose 18 per cent YoY to Rs 1,415 crore, led by CDMO and FDF divisions.
• EBITDA Margin Surge: EBITDA increased by 56 per cent YoY to Rs 285 crore, with margins improving to 20.1 per cent.
• Profitability Boom: Profit Before Tax soared 285 per cent to Rs 131 crore, while Net Profit grew 300 per cent to Rs 92 crore. Diluted EPS jumped 325 per cent to Rs 1.7.
• Divisional Highlights:
  • CDMO: Revenue surged 89 per cent to Rs 400 crore due to asset ramp-ups and clinical project advancements.
  • FDF: Sales grew 19 per cent to Rs 436 crore, driven by volume growth in ARV and developed markets.
  • API: Revenue declined 7 per cent to Rs 531 crore due to capacity constraints but is expected to rebound next year.
  • Bio Division: Revenue rose 14 per cent to Rs 48 crore, backed by expanded fermentation capabilities.

Management remains optimistic about FY25, citing strong growth drivers and strategic focus areas:

• CDMO Expansion: New assets, client interest, and increased R&D activity position CDMO as a key growth engine.
• FDF Momentum: New launches and market penetration are expected to sustain growth.
• API Recovery: Improved capacity allocation and order conversions could revive the API segment.
• Bio Investments: A Rs 120 crore equity infusion will expand fermentation capabilities, with a new facility planned by 2026.
• Operational Efficiency: Enhanced asset utilization and productivity gains are expected to support profitability.

Management reaffirmed its full-year growth outlook, anticipating revenue acceleration in Q4, driven by late-phase clinical project deliveries and strategic CAPEX in high-value opportunities.

While Laurus Labs faces near-term headwinds due to U.S. policy uncertainty, its strong financial performance and strategic focus on CDMO and FDF divisions underscore its resilience. On January 27, 2025 till 12.58 pm the Lauras Lab’s trades at Rs 525.50 down 12.76 per cent. Laurus Labs Limited is a leading player in the global pharmaceutical industry, offering a wide range of Active Pharma Ingredients (API), Generic Finished dosage forms (FDF), and Contract Research services. With a strong presence in anti-retroviral, Hepatitis C, and Oncology drugs.

Disclaimer: This article is for informational purposes only and should not be construed as investment advice.