Laurus Labs Ltd (LAURUSLABS) Q2FY27 Concall Transcript - Sep-2026 Qtr
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Moderator: Ladies and gentlemen, good day, and welcome to Laurus Labs Q2 FY '27 earnings conference call, hosted by DAM Capital Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touchtone phone. Please note that this conference is now being recorded. I now hand the conference over to Mr. Nitin Agarwal from DAM Capital Advisors Limited. Please go ahead, sir.
Nitin Agarwal (DAM Capital Advisors Limited): Hi, thank you. Good afternoon, everyone, and a very warm welcome to Laurus Labs Q2 FY '27 earnings call hosted by DAM Capital Advisors Limited. On the call today, we have representing Laurus Labs management, Dr. Satyanarayana Chava, Founder and CEO, Mr. V. V. Ravi Kumar, Executive Director and CFO; Mr. Krishna Chaitanya Chava, ED, Head CDMO; Mrs. Soumya Chava, ED, Affordable Medicines and Commercial; and Mr. Vivek Kumar, AVP, Investor Relations. Before we proceed, I would likely to do remind you that some of the statements made during the call today could be forward-looking in nature, and a safe harbor statement to this effect has been included in the press release that has been shared on the company's website. I hand over the call to Dr. Chava to make the opening comments, and then we'll open the floor for questions. Please go ahead, sir.
Satyanarayana Chava (Laurus Labs Ltd): Thanks, Nitin. Good afternoon to all our stakeholders. We are pleased with the substantial progress company making across various business segments. We continued to report strong growth in CDMO business, steady momentum in affordable medicine portfolio because of our major advancement in our partners' clinical and commercial programs. The strong performance reflects sustainable, robust demand for our specialized capabilities, integrated offerings, depth of our customer relationship, and disciplined operational execution by our team. In line with our accelerating transformation strategy, we're actively investing into building scientific capabilities and capacities across complex and new modalities.
Satyanarayana Chava (Laurus Labs Ltd): overall reactor volume for small molecules API in operation has now reached over 9,000 kiloliters and will continue to expand further. We are also pleased to highlight some of the important disclosures we have made in this quarter's investor presentation on the advancements we are making in our integrated peptides CDMO capability. We commissioned commercial scale peptide manufacturing block. Our current reactor volume for solid-phase peptide synthesis is over 16,000 L, and we have taken up a significant further expansions to meet diverse program requirements. We continue to strengthen the capacity of liquid-phase peptide synthesis and several new technologies. We are also augmenting our capacities through disciplined business development. During the quarter, we have announced investment into two net technology platform companies. The one is an agreement to acquire majority 60% stake in Canada-based Galenvs Sciences specializing in oligonucleotides and precision magnetic nanoparticles-based purification. The leveraging Galenvs expertise in early stage oligo projects, process development, conjugation, precise purification and fill-finish, along with Laurus large-scale expertise in complex chemistry, we intend to support clients with seamless journey from complex RNA, DNA-based therapies as a one-stop solution. Together, this will expand Laurus position to participate in emerging high-growth oligo market. Second is an acquisition of majority stake in Seanc Resins, a peptide resin technology-focused company based out of Hyderabad. This will allow us to enhance long-term supply security by insourcing critical solid support resins for peptide synthesis and also chromatography stationary phases for large-scale peptide purification. This will bolster Laurus manufacturing competitiveness and reliability with our current and future partners programs. These acquisitions are aimed to advance Laurus integrated scientific capabilities under one roof. These acquisitions are strengthened by Laurus quality infrastructure that will cater to more complex customized projects along with significant increase in future therapeutic demands. Moving on to our financial results, Laurus has maintained its growth trajectory and once again delivered a record revenue and profits for quarter 2. Total revenues were 2,206 crores reflecting a continued strength of our CDMO platform, growing contribution from commercial phase supplies, and ongoing momentum in affordable medicines portfolio. Gross margins were also healthy and maintained at around 63%, and EBITDA margins further expanded over previous quarters by 2.7 percentage points to 34.5%. Product mix and operating leverage continue to do well, supporting healthy margins overall. I would request Mr. Krishna Chaitanya to share key updates on our CDMO business.
Krishna Chaitanya Chava (Laurus Labs Ltd): Thank you. Coming to the small molecule CDMO, the business has continued to deliver robust operational execution in Q2 reporting a 86% growth with the sales of 875 crores. For the first half of the year, of the current financial year, the division recorded ₹1,710 crores. That equates to about 77% growth. This performance was driven by successful delivery of critical late-stage programs, as well as commercial API supplies to multiple global partners. We also continue to see encouraging demand on the newly commissioned assets across both human health and animal health businesses, both in terms of the volumes and opportunities with existing partners, as well as with new client engagements. The company remains focused on enhancing our core capabilities and capacities to better meet customer demand driven by continuous expansions. As Dr. Satya highlighted in the opening remarks, we have commissioned our peptide manufacturing facility and our investment towards other multiple large-scale API opportunities continues to take place in our Vizag site. Strategically, we are elevating client collaboration on complex, new modalities, and our focus remains on securing fully integrated projects, seemly- seamlessly supporting partners from preclinical development going all the way to finished drug product services. Driven by this end-to-end capability, our CDMO pipeline continues to expand. We are adding clinical programs across a highly diversified mix of manufacturing technol-
Krishna Chaitanya Chava (Laurus Labs Ltd): as well as therapeutic indications. I would say with our capability expansion, deeper integration and expanding pipeline, Laurus is well-positioned to sustain a healthy business growth in the coming years. Now moving on to Laurus Bio. The Laurus Bio division reported a Q2 sales at Rs. 29 crores and for the first half of this financial year, that is at Rs. 64 crores. The year-over-year variation is primarily due to the campaign phasing, though our underlying pipeline momentum remains strong. We are actively increasing longer-term strategic relationships with our major customers across both AOF as well as CDMO programs towards anchoring our future pipeline. On the capacity front, our commercial fermentation facility, Laurus Bio 4 is progressing as planned, and we expect this to be operational by the end of this year. And we are already advancing on customer capacity reservations for this facility. Now, I would request Ms. Soumya Chava to share key updates on our affordable medicines portfolio.
Soumya Chava (Laurus Labs Ltd): Yeah. Thank you. Revenues from the affordable medicine stood at 1,302 crores in Q2, which represents a strong 15% year-on-year growth. For the first half of this financial year, we achieved a healthy growth of 13%. This growth was driven by continued expansion of our order book across various established portfolios, which was also supported by stable pricing in both our ARV portfolio and developed market portfolios. Looking ahead, we remain committed to investing in the business in line with evolving market requirements. The positive long-term outlook is underpinned by a robust pipeline of new product launches, integrated CMO engagements, and ongoing expansion of product registrations across emerging markets, which is creating new business opportunities for us. I'm also pleased to report that despite heightened global volatility, our supply chain has demonstrated exceptional agility, enabling us to maintain highly reliable delivery performance for all our global partners. With respect to our strategic Krka joint venture, progress at the formulation facility remains firmly on track. The Phase 1 production blocks are scheduled to commence operations in mid-2027, which will significantly enhance our commercial capabilities with a focus on high-potent and general OSD manufacturing. On the filings front, we have cumulatively filed 92 DMFs to date. In developed market formulation business, we've filed two dossiers and received two approvals during H1. Overall, we have cumulatively filed 96 products to date. Thank you.
Satyanarayana Chava (Laurus Labs Ltd): Thanks, Krishna and Soumya, for the overview on CDMO and affordable medicine segments. On R&D front, overall spending to sales for first half of this financial year was at 4.3%, increased by over 34% year-on-year, which has been exceptionally high, primarily on account of capability development efforts for our gene therapy, ADC technology infrastructure. We maintain our commitment to invest in portfolios focusing on product complexity, scale, and sustainable technology platforms. I would also like to share a brief on quality and ESG. In the first half, Laurus underwent 59 quality audits by multiple regulatory agencies and key partners, and has been successfully cleared audit inspections without any critical findings. On ESG front, we continue to drive sustainability initiatives, with continued recognition by leading global rating agencies. Meanwhile, we are also making operational progress against our SBTi validated near-term GHG reduction targets. You can see more in our IR slides. To conclude, we are pleased with the way we are executing our transformational strategy, and headway we are making into building a stronger foundation for future. By broadening our integrated capabilities, diversifying our pipeline, and advancing key commercial opportunities, we are well positioned to accelerate our long-term growth trajectory. Now, I request Mr. Ravi Kumar, our CFO, to share overall financial highlights.
V. V. Ravi Kumar (Laurus Labs Ltd): Thank you, doctor. A very warm welcome to everyone to our Q2 and H1 earning call. Let me take quickly through highlights. Total income from operations for H1 is at 4,233 crores, registering a growth of 31%. We continue to deliver strong growth mainly due to
V. V. Ravi Kumar (Laurus Labs Ltd): in CDM execution and stable performance in Affordable Medicine. For the quarter 2, total income from operations is 2,206 crore, which is the highest in the from the from the beginning. Gross margin maintained at healthy level for H1 at 62.9% and for quarter 2 at 63% mainly due to better product division, product mix and division mix and improved operational efficiencies. EBITDA for H1 stands at 1,406 crore with a margin of 33.2%. For the quarter 2, EBITDA reported at 762 crore with a margin of 34.5%. This profitability is on account of improved operational leverage. Profit after tax for H1 at 809 crores and for the quarter 2 at 441 crores. So, our ROCE is moving upwards with to 22.5% for the H1 versus 26 of 26 of 17.7%. On the capex front, we invested close to 470 crores for the quarter and 864 crores for the H1. We are making good progress in executing ongoing key capex across diversified growth projects. Our net debt stood at 2,466 crores and net debt to EBITDA is around 1.02 versus 1.28 for the last quarter on the back of strong internal cash flows. On the capital allocation front, our strategy remains unchanged and we will continue to prioritize investments into high-value business segments to drive near and long-term growth for all our stakeholders. You can refer our IR presentation for more details. With this, I would request the moderator to open the lines for Q&A. Thank you.
Moderator: Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touch tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Tushar from Motilal Oswal Financial Services. Please go ahead.
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