Despite 400% Surge Since April, Brokerages Sees More Upside In This Pharma Stock

After COVID-19 outbreak, pharma stocks have performed well on expectations of higher earnings.

Pharma company Laurus Labs has also benefited from this momentum, surging 404% since the start of April this year. However, analysts at Anand Rathi see 29% more upside in the stock.

"Based on growth visibility in Formulations as well as in the API segment, we are confident of sustaining the momentum in earnings. We also believe that the Laura Labs is well positioned for continued long term growth," the brokerage said.

It has a "buy" rating on the stock with a target price of Rs 424 per share in 12 months. Shares of Laurus Labs closed at Rs 328 on 11 December.

Laurus Labs is principally engaged in offering a broad and integrated portfolio of Active Pharmaceuticals Ingredients (API) including intermediates, Generic Finished dosage forms (FDF) and Contract Research services to cater to the needs of the global pharmaceutical industry.

Recently the company signed a definitive agreement to acquire a majority stake of 72.5% in Richcore Lifesciences Pvt Ltd (Richcore). Post successful closure of the transaction, Richcore will be renamed to Laurus Bio Pvt. Ltd.

"This acquisition marks Laurus Labs' entry into the broader biologics and biotechnology segments, providing the company access to its high growth areas, globally and in India. With this acquisition, Laurus adds a fourth revenue stream to its three existing divisions - API, Formulations and Synthesis," it said.

Post the announcement Motilal Oswal maintained its "buy" rating on the stock and raised its target price to Rs 410.

"The acquisition is a step towards building a vertically integrated biotech segment and adds a new lever to growth. It particularly provides capabilities in high growth areas of Recombinant (Rh) Proteins, Enzymes and Biological Contract Development and Manufacturing Organization (CDMO)," the brokerage firm said.