Tag - revenue growth

Plan to cross USD 1bn revenue by FY23 – Laurus Labs

Update on the Indian Equity Market:

The Nifty50 made a comeback in the last hour to end the day a little changed at 14,634. Among the index components, SBILIFE (+5.4%), BHARTIARTL (+4.5%), and ADANIPORTS (+4.5%) ended the day with gains. TITAN (-4.6%), INDUSINDBK (-2.3%), and RELIANCE (-1.9%) ended in the red. METAL (+2.2%), FMCG (+1.1%), and PHARMA (+0.3%) were the top sectoral gainers while MEDIA (-1.4%), PRIVATE BANK (-1.1%), and BANK (-1.0%) led the sectoral losers.

Excerpts of an interview with Mr. Satyanarayana Chava, Founder & CEO, Laurus Labs aired on CNBC TV-18 on 30th April 2021:

  • Laurus Labs recently declared 4QFY21 results, wherein Active Pharmaceutical Ingredient (API) revenue is up 88 percent and formulations are up 61 percent YoY. EBITDA margins reported were 33.4%.
  • They have the capacities, products to be made, and customer demand and expect reasonable growth in FY22.
  • The 30% + EBITDA margin is a benchmark. They will aim to achieve these margins to maintain healthy growth.
  • They continue to invest in infrastructure, investing Rs 7,000mn in FY21. They have earmarked Rs 15,000-17,000 mn for FY22 and FY23 for capex to augment their capacities in all 3 divisions.
  • The growth in API business has nothing to do with manufacturing Covid-19 drugs. The growth came primarily from antiretroviral, oncology and contract manufacturing for other generic companies. So far, there hasn’t been any disruption in the supply chain and no impact is expected from the 2nd Covid wave. There was an increase in logistic cost though.
  • The internal target is to cross USD 1bn in revenues by FY23E. With the capex incurred in FY21 and planned in FY22-23E, there will be a growth in revenues in FY22-23E.
  • The raw material price increase in products such as Paracetamol and Azithromycin was due to higher demand. In the products Laurus labs is manufacturing, the demand has not shot up as it has for the 2 products.
  • They are not passing on any of the incremental costs to customers. Due to covid-19, there was an incremental expense of USD 10mn, which was not passed onto customers.
  • Rather than investing in a one-time product, they are investing in the longer term. There is significant investment being made in the CRAMS business as they foresee sizeable growth in that division.

Asset Multiplier Comments

  • The ramp-up in formulations business is expected to continue over FY20-23E. The execution in the US and EU are crucial to drive the next leg of formulations growth.
  • With a renewed focus on the synthesis segment, with R&D, increase in the number of customers, and addition of capabilities positions Laurus to evolve its business mix over the next 3-5 years.

Consensus Estimate: (Source: market screener website)

  • The closing price of LAURUSLABS was ₹ 478/- as of 03-May-2021. It traded at 22x/ 20x the consensus earnings estimate of ₹ 21.3/ 23.9 per share for FY22E/FY23E respectively.
  • The consensus target price of ₹ 414/- implies a PE multiple of 17x on FY23E EPS of ₹ 23.9/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

Expanding hiring of freshers based on demand – HCL Tech

Update on Indian Equity Markets:

Markets continued their upward momentum on Tuesday as Nifty closed the day 174 points higher at 14,659. Within the index, HINDALCO (5.1%), TATASTEEL (3.9%) and DIVISLAB (3.5%) were the highest gainers while HDFCLIFE (-3.6%), SBILIFE (-1.4%) and MARUTI (-0.9%) were few of the losers. All the sectoral indices closed in green with METAL (2.8%), PSUBANK (2.5%) and MEDIA (1.8%) leading the pack. 

Excerpts of an interview with Mr C Vijaykumar, CEO and Prateek Aggarwal, CFO, HCL Technologies Ltd (HCLTECH) with CNBC -TV18 dated 26th April 2021:

  • During the Mar-21 quarter, bookings stood at $3.1bn, led by 19 large deal wins. These deals are spread across geographies and industries. Most deals are spread across 3-5 years, of which four are integrated across service lines.
  • The Company has prepared a list of seven countries i.e. Germany, Canada, Japan, Spain, Portugal, Mexico and Brazil. These are countries witnessing a large and growing IT market where the Company is currently not present. Setting up offices in new countries is a one-time exercise.
  • The Company is also expanding hiring in the freshers space, considering the demand for the next few years. The hiring also involves certain cost elements.
  • The Company has launched HCL Now, which is the Cloud version of its acquired products. This is strengthening partnerships of HCLTECH with hyperscalers.
  • The Company is expected to deliver double-digit growth in constant currency. The management highlighted that they have provided floor price on revenue growth for next year. 
  • The products and platforms business had an impairment charge of $16mn, leading to a 60 bps impact on margins.   

Asset Multiplier Comments:

  • Backed by deal wins in both small and big pockets and continued momentum in cloud and data, the company looks set to achieve its target of double-digit growth over FY22E.
  • Setting up offices in new countries to expand the geographical presence is expected to create a revenue stream and diversify the revenue base for the Company in the long run.

Consensus Estimates (Source: market screener website):

  • The closing price of HCLTECH was ₹ 928/- as of 27-April-2021.  It traded at 18x/ 16x the consensus EPS estimate of ₹ 51.0/ 57.4 for 22E/23E respectively.
  • The consensus price target is ₹ 1,119/- which trades at 19x the EPS estimate for FY23E of ₹ 57.4/-

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”