NEULANDLAB - Neuland Laboratories Limited. Share Price

Management's outlook for Neuland Laboratories Limited is optimistic, highlighting FY26 as a year of strong growth, particularly compared to FY24. For Q2 FY26, total income reached Rs.516 crores, up 63.7% from Rs.315 crores in the same quarter last year. The driving force behind this growth was the commercial CMS projects, achieving an all-time high quarterly revenue. EBITDA stood at Rs.156.9 crores with a margin of 30.4%, while profit after tax surged to Rs.96.5 crores from Rs.32 crores year-on-year, resulting in an EPS of Rs.75.18.

Key forward-looking points shared by management include the expectation of continued momentum in the CMS business, particularly from two top commercial molecules and the pending commercialization of another molecule this fiscal year. Management anticipates additional growth from new business projects over the next 12 to 18 months, backed by an increase in customer engagement.

Investment plans include the continued expansion of the peptide facility, with Module-1 expected to be operational in the next financial year and a total investment of approximately Rs.250-280 crores required for the peptide production suite. The company is also focused on optimizing cash flow, working capital management, and mitigating risks related to foreign exchange, raw material volatility, and geopolitical factors.

Overall, Neuland is positioned to capitalize on trends in the market, maintaining a strong focus on enhancing capabilities and customer relationships while navigating the complexities of the CDMO landscape.

Here are the major questions and their detailed answers from the Q&A section of the Neuland Laboratories Q2 FY26 Earnings Conference Call:

Q1: What new commercial projects are contributing to growth apart from the two mentioned? Can you provide visibility for the second half of the year?

A1: While two key molecules are driving our growth, we anticipate another molecule soon to begin commercial shipments. We expect FY'26 to show strong growth compared to FY'24, but we refrain from providing specific guidance for Q3 and Q4.

Q2: What API capabilities are being built for GLP-1, and what is the targeted capacity?

A2: We're developing a four-module peptide facility. By next financial year, Module-1 will be operational, aiming for 2,000-liter SPPS reactors. Exact capacity is process-dependent, making it difficult to quantify in kilos or tons, but we're focusing on efficiency and capability expansion.

Q3: Why did Neuland increase headcount while the CDMO pipeline is low?

A3: Despite lower development revenue, our new project pipeline is strong. Increased headcount addresses project scale-ups and modernizes R&D with new techniques. The aim is to enhance quality and efficiency while preparing for future project growth.

Q4: How does Neuland align its people strategy with long-term sustainability goals?

A4: We focus on a clear business model emphasizing process development, integrating sustainability into our operations. Our incentives align with innovation and accountability at all levels, fostering a culture where sustainability and performance are key priorities.

Q5: Can you update on the recently commissioned block for Rs. 128 crore?

A5: Yes, the block is commissioned, and while early shipments began in Q1FY26, it primarily validates products this quarter, with full commercial shipments expected to follow.

Q6: What can you share about cash flow and working capital management?

A6: Inventory increased due to anticipated sales growth, but we aim to optimize it over the next months. Receivables reflect our production stages, and we're working on smoother inventory management to even out cash flow discrepancies.

Q7: Could you clarify the additions and removals from the CMS pipeline?

A7: Adding and removing molecules reflects clinical trial outcomes. New Phase-3 intermediates contribute, while we let go of mature products with no further commercial prospect, a strategy to refine our portfolio over time.

Q8: How does competitive intensity affect the GDS segment? Are you optimistic for growth?

A8: The GDS segment remains competitive, but for many of our products, we face minimal competition. We see growth potential, especially as we address small-volume specialty products, though unevenness may persist.

Q9: What expected revenues come from products progressing to Phase-3?

A9: Yes, as clients advance to Phase-3 trials, we foresee potential revenues emerging from these projects. This movement in the pipeline suggests growth opportunities forthcoming.

Q10: What is the CAPEX for large-scale peptide facilities?

A10: Module-1's CAPEX is around Rs. 250-280 crores, projecting total investments exceeding Rs. 1,000 crores for comprehensive peptide production capabilities, aiming to fulfill significant commercial demand.

This summary captures key inquiries and responses from the call, ensuring clarity on growth strategies and future directions.