India Equity Value investor, Trivikram Consultants

Prashant Vaishampayan

India Equity Value investor

Picking Long Term Multi-bagger stocks

Trivikram Consultants

Trivikram Consultants is an equity research service founded by Prashant Vaishampayan, a registered Research Analyst with SEBI in India. Prashant has done equity research since 1992.  He worked with Jardine Fleming, SG Securities, UBS and Kotak Securities. Since 2010, he is managing his portfolio and doing outsourced equity research for institutional clients. A team of six professionals helps him in equity research. We focus on pharma, agro-chemicals, auto and auto components, banks and financial services, specialty chemicals and niche manufacturing sectors.   

Equity Bottom-Up

<ul class="">
<li>
<a href="https://www.smartkarma.com/entities/23686" target="_blank" data-smartkarma-citation="entities:23686:1">Laurus Labs (LAURUS IN)</a> disappointed on sales and reported PAT but EBITDA margins (adjusted for one-time costs) were better than our forecasts.</li>
<li>Laurus expects its dosage business to turn profitable from FY20E, which will be the key growth driver for Laurus., We expect revenues and PAT to grow at CAGR 18% and 30% (FY18-20E) respectively.</li>
<li>We expect EBITDA margins to go down in FY19E to 17.3% from 20.1% in FY18 due to weaker performance in 1HFY19. Dosage business is likely start generating profits from FY20E driving margin expansion of 430 bps to 21.6% in FY20E.</li>
<li>We have maintained a PE target multiple of 20x on the estimated EPS of Rs 32 per share for the year ending September-20E to arrive at the fair value estimate of Rs 640 over the next 12 months.</li>
<li>We continue to believe that better days are ahead for Laurus. This is due to its focus on high margin synthesis and finished dosage segment. Backward integration will reduce raw material costs from 4Q FY19E.</li>
</ul>
<table class="table table-striped">
<tbody>
<tr>
<td>
Particulars (Rs Mn)
</td>
<td style="text-align: right;">
Net sales
</td>
<td style="text-align: right;">
EBITDA
</td>
<td style="text-align: right;">
PAT
</td>
<td style="text-align: right;">
EPS
</td>
<td style="text-align: right;">
ROE(%)
</td>
<td style="text-align: right;">
ROCE(%)
</td>
<td style="text-align: right;">
PE(x)
</td>
</tr>
<tr>
<td>
2017
</td>
<td style="text-align: right;">
19,315
</td>
<td style="text-align: right;">
4,076
</td>
<td style="text-align: right;">
1,903
</td>
<td style="text-align: right;">
18.0
</td>
<td style="text-align: right;">
17.4%
</td>
<td style="text-align: right;">
16.0%
</td>
<td style="text-align: right;">
21
</td>
</tr>
<tr>
<td>
2018
</td>
<td style="text-align: right;">
20,561
</td>
<td style="text-align: right;">
4,132
</td>
<td style="text-align: right;">
1,674
</td>
<td style="text-align: right;">
15.8
</td>
<td style="text-align: right;">
11.9%
</td>
<td style="text-align: right;">
13.1%
</td>
<td style="text-align: right;">
24
</td>
</tr>
<tr>
<td>
2019E
</td>
<td style="text-align: right;">
23,284
</td>
<td style="text-align: right;">
4,019
</td>
<td style="text-align: right;">
1,081
</td>
<td style="text-align: right;">
10.2
</td>
<td style="text-align: right;">
7.1%
</td>
<td style="text-align: right;">
9.3%
</td>
<td style="text-align: right;">
38
</td>
</tr>
<tr>
<td>
2020E
</td>
<td style="text-align: right;">
28,659
</td>
<td style="text-align: right;">
6,202
</td>
<td style="text-align: right;">
2,839
</td>
<td style="text-align: right;">
26.8
</td>
<td style="text-align: right;">
16.6%
</td>
<td style="text-align: right;">
17.7%
</td>
<td style="text-align: right;">
14
</td>
</tr>
</tbody>
</table>
<div class="content-caption"> Source- Laurus Annual Report FY18, Trivikram Consultants Research as on 15/11/2018</div>



Laurus Labs (LAURUS IN) disappointed on sales and reported PAT but EBITDA margins (adjusted for one-time costs) were better than our forecasts.
Laurus expects its dosage business to turn profitable from FY20E, which will be the key growth driver for Laurus., We expect revenues and PAT to grow at CAGR 18% and 30% (FY18-20E) respectively.
We expect EBITDA margins to go down in FY19E to 17.3% from 20.1% in FY18 due to weaker performance in 1HFY19. Dosage business is likely start generating profits from FY20E driving margin expansion of 430 bps to 21.6% in FY20E.
We have maintained a PE target multiple of 20x on the estimated EPS of Rs 32 per share for the year ending September-20E to arrive at the fair value estimate of Rs 640 over the next 12 months.
We continue to believe that better days are ahead for Laurus. This is due to its focus on high margin synthesis and finished dosage segment. Backward integration will reduce raw material costs from 4Q FY19E.





Particulars (Rs Mn)


Net sales


EBITDA


PAT


EPS


ROE(%)


ROCE(%)


PE(x)




2017


19,315


4,076


1,903


18.0


17.4%


16.0%


21




2018


20,561


4,132


1,674


15.8


11.9%


13.1%


24




2019E


23,284


4,019


1,081


10.2


7.1%


9.3%


38




2020E


28,659


6,202


2,839


26.8


16.6%


17.7%


14




 Source- Laurus Annual Report FY18, Trivikram Consultants Research as on 15/11/2018

Laurus Labs 2QFY19 Results Update - Growth Likely to Begin from FY20E