Laurus Labs – A process Innovator and a CRAMS player – deserves much higher multiple

With more than 100 process patents on his name, Dr Chhava has created a sustainable competitive advantage for Laurus Labs. Similar to drug innovator enjoying 15 years patent protection,
Laurus enjoys patent protection for its economically viable and innovative processes for different APIs like Efavirenz, Tenofovir, Dolutegravir, Metformin, Ivacaftor and many more..

Laurus developed novel and cost effective process for Efavirenz which reduced the cost by 50%...
Similar thing repeated when newer HIV regimen, Dolutegravir came into effect..Laurus developed its own proprietary novel and cost effective process for is one of the few players having approval for TLE400...It has got process patent for Metformin where it can be
manufactured without NDMA impurities..The strategy is clear..focus is product specific rather market specific and on developing cost effective novel process for large APIs and gain cost leadership in those…
it already enjoys more than 25% market share in 7 of its products and want to do this for 15 APIs in next 2-3 years…since it got the process patent, competitive advantage that’s getting built is sustainable for long term..and it is reflecting in numbers..RoCE is 30% plus..
Forward integration into formulation is already underway with capacity of 5Bn tablets and 5Bn more is coming in next 18 months..Laurus is going to spend 1400-1500 crs on brown field and green field capex with 40% for APIs, 40% for formulations and 20% for CRAMS..
Currently it reports 10% of the revenue as CRAMS but in real sense, CMO + CDMO is 25-30% if we include the contract manufacturing under its API and formulation verticals..There are few very interesting opportunities evolving in custom synthesis with C2 pharma in phyto chemicals
So investors are getting a process Innovator and a CRAMS player at 15x FY22 whereas generic pharma companies like Cipla, DRL, Lupin having <20% RoCE are all trading at 20-25x FY22 and CRAMS players such Divis and Syngene are trading at 30-40x FY22…
Laurus lies somewhere between these two groups…

Discl. - No recommendation. I own the stock. Please do your own research

@drprashantmish6 @punitbansal14 @unseenvalue

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