Laurus Labs CDMO surge and customer-backed capex underpin sustained growth outlook

Investment View and Valuation

ICICI Direct Research's July 26, 2026 report on Laurus Labs retains a BUY recommendation. The broker believes the growing scale, improved quality and diversification of the custom development and manufacturing organisation (CDMO) business, together with sustained capital expenditure and consistently strong operating performance, justify a premium valuation.

Business Profile and Revenue Mix

Laurus Labs operates across generic active pharmaceutical ingredients (APIs), generic formulations, CDMO and biotechnology. The company has 15 manufacturing units, including seven United States Food and Drug Administration-approved sites, 92 drug master files and reactor capacity of about 8,300 KL. It is also investing in cell therapies, gene therapies and other advanced technologies.

Q1FY27 Financial Performance

Reported Q1FY27 revenue was Rs 2,026 crore, increasing 29 per cent year on year and 11.9 per cent quarter on quarter. EBITDA rose 67 per cent year on year to Rs 638 crore, while EBITDA margin improved 715 basis points to 31.5 per cent. Margin expansion was led primarily by a 330-basis-point improvement in gross margin to 62.7 per cent. Reported profit after tax increased about 125 per cent year on year to Rs 362 crore.

CDMO revenue increased about 70 per cent year on year to Rs 835 crore. Generic API revenue rose 3 per cent to Rs 654 crore, generic formulations grew 22 per cent to Rs 502 crore and Laurus Bio revenue increased 21 per cent to Rs 35 crore.

CDMO Growth and Customer-Backed Expansion

Management said CDMO growth was broad based rather than dependent on a single large purchase order. The CDMO quarterly run rate has increased from Rs 220 crore to Rs 250 crore, then to Rs 450 crore to Rs 500 crore, and now to about Rs 800 crore over two years.

• Commercial supplies contributed 55 per cent of CDMO revenue, with the balance largely coming from Phase III programmes and providing potential visibility for commercial conversion.
• Management highlighted improved conversion through clinical stages, with no meaningful revenue concentration by customer, product or therapeutic area.
• The company continues to focus on peptides, antibody-drug conjugates and gene therapies.
• Commercial-scale peptide capacity expansion is progressing in response to customer demand.
• Incremental capital expenditure is directed towards identified requirements across multiple customers, products, APIs and advanced intermediates.

Management reiterated that CDMO could contribute more than 50 per cent of Laurus Labs' revenue by FY30.

Capital Expenditure and Capacity Expansion

Of more than Rs 4,700 crore of capital expenditure incurred during FY22 to FY27, about 83 per cent was allocated to API and CDMO. FY27 capital expenditure guidance was raised to Rs 2,000 crore from the earlier range of Rs 1,000 crore to Rs 1,500 crore, with the spending largely tilted towards CDMO. Q1FY27 capital expenditure was Rs 394 crore and net debt stood at Rs 2,656 crore.

Laurus Pharma Zone, a 530-acre site allotted by the Andhra Pradesh government, could support a further growth capital expenditure phase. Potential investment across three phases over eight years is estimated at Rs 5,630 crore.

Generics, Laurus Bio and Research Investments

In generics, management cited higher ARV and oncology volumes and continued momentum in recently launched developed-market formulations. ARV API revenue was Rs 415 crore and ARV formulation revenue was Rs 254 crore. Management expects the current mix of one-third ARV and two-thirds non-ARV to represent the highest ARV contribution, with non-ARV increasing over time.

Cumulative filings reached 92 drug master files and 96 developed-market formulation dossiers. Laurus Bio expects its 400-plus KL commercial fermentation facility to be operational by the end of CY26, followed by meaningful scale-up over the next 18 to 24 months.

Research and development spending rose to 5.8 per cent of revenue, an increase of about 70 per cent year on year. Spending was principally directed towards gene therapy, antibody-drug conjugate infrastructure and the complex pipeline.

ICICI Direct Estimates

The broker forecasts continued growth in revenue, EBITDA and adjusted profit through FY28E.

Key Risks

• Heavy dependence on the success of the CDMO business.
• Volatility in the non-ARV, non-CDMO businesses.