Laurus Labs (LAURUSLABS) offers a masterclass in capital allocation pivot. Known for APIs, they are aggressively re-rating into a Contract Development and Manufacturing Organization (CDMO).
The CDMO Growth Engine
The numbers tell the story of a transformation.
- Revenue Shift: CDMO now contributes 30% of revenues (up from 19% in FY21).
- Growth Velocity: The small-molecule CDMO segment grew 88% YoY in H1 FY26.
They aren’t just making pills anymore; they are partnering on the science.
CapEx Cycle & Capacity
Laurus is in the middle of a massive CapEx cycle (₹1,000 Cr/year).
- Visakhapatnam: Doubling fermentation capacity for biologics/proteins.
- The Risk/Reward: Markets hate CapEx cycles because they depress free cash flow today. We love them because they build the capacity for tomorrow’s revenue.
Analyst Consensus vs. Reality
Analysts are largely “Neutral” or “Sell” due to short-term API weakness and high valuations.
- Our View: The market is looking at quarter-over-quarter API pricing. We are looking at the 5-year outlook for global pharma supply chains moving away from China (“China Plus One”).
- Earnings Power: With net profit jumping 882% YoY in Q2 FY26 off a low base, the operating leverage is kicking in. Long-term earnings are forecast to grow at 25%+ annually.