Laurus Labs

Laurus Labs reported robust financial performance for FY26, with revenues growing 23% YoY to INR 6,813 crores. The company's EBITDA margin expanded significantly by 6.7 percentage points to 26.8% for the full year, reaching 28.9% in Q4 FY26. This performance reflects sustained demand for technology-driven commercial offerings and a successful transformation of its portfolio, with CDMO business now contributing over 30% of revenues, up from 13% six years ago. The company's ROCE improved to 17.7% from 9.7% in the previous year, demonstrating enhanced capital efficiency.

The CDMO segment delivered strong operational execution, clocking INR 2,080 crores in FY26. Small molecule CDMO, a key driver, grew 38% to INR 1,896 crores for the year, with Q4 sales at INR 524 crores. This growth was fueled by late-stage pipeline programs, commercial NCE API supplies, and ramp-up of growth projects. Management expressed confidence in maintaining positive growth in CDMO, with a long-term target for CDMO revenues to constitute 50% of overall sales by FY30. They also noted that their commercial APIs are early-stage with long patent lives, mitigating inventory destocking risks.

The Affordable Medicines division, formerly Generics, reported INR 1,223 crores in Q4 and INR 4,733 crores for FY26, marking an 18% growth. This growth was primarily driven by higher volumes in ARV and oncology portfolios, alongside strong traction from new launches in developed markets. The company maintained a consistent supply track record despite global supply chain challenges^🌐. For non-ARV formulations, the company expects continued growth by utilizing existing capacities and leveraging momentum from FY26.

Laurus Labs invested INR 335 crores in Q4 and INR 1,070 crores for the full year FY26 in capital expenditure. Over 75% of this investment was directed towards expanding CDMO and CMO capabilities. The company plans to spend approximately INR 3,000 crores over the next two years, with 90% allocated to mid- and large-scale manufacturing. Key projects include a new greenfield manufacturing unit (Unit 7) with first production by March '27, a commercial scale peptide manufacturing block ready by Q2 FY27, a Laurus Bio fermentation site by end of 2026, and a KRKA JV formulation facility by mid-2027.

The company's R&D spending for FY26 was 4.1% of sales, an increase of 10% YoY, with a similar percentage expected for the next year. Investments are focused on product complexity, scale, and sustainable technology platforms, including biocatalysis, flow chemistry, hydrogenations, and continuous manufacturing. Laurus is also expanding its biotech initiatives into areas like enzyme manufacturing, animal-origin-free cell culture ingredients, precision fermentation, cell therapy, gene therapy, and fermentation of pharmaceutical intermediates, with current Vizag expansion for non-pharmaceutical applications.

Gross margins remained healthy at around 60% for FY26, with Q4 reaching 61.4%, driven by better product mix and process improvements. EBITDA margins expanded by 6.7 percentage points to 26.8% for FY26, with Q4 at 28.9%. Management is confident in maintaining or improving these EBITDA margins in FY27, anticipating operational leverage to contribute to future profitability as capacities expand. Despite some impact from solvent price increases in Q4, the company expects to weather such challenges through operational mix and capacity utilization.

The contribution of ARV revenues to total sales has decreased from 67% six years ago to 41% in FY26, while absolute ARV sales remained robust at approximately INR 2,800 crores. Management expects absolute ARV revenues to remain constant in the coming years, but its percentage contribution to overall sales will continue to decline as other segments, particularly CDMO, grow significantly. This strategic shift reduces reliance on a single product category and diversifies the revenue base.