04-Nov-2026 08:24:02
GS on Neuland Labs ; Buy, TP Rs 25275
Q2 sales/EBITDA declining 13%/37% respectively, ahead of GSe, on account of weakness in commercial CMS projects (-5% vs GSe) and decline in the Spec API segment (-21% vs. GSe). EBITDA margin came in at 21.7% (-856bps yoy), despite improvement in gross margin on account of operating deleverage. Management reiterated that quarterly performance can remain uneven & should be assessed over a longer period, given the inherent lumpiness in CMS ordering patterns. Expect NEUL’s growth trajectory to remain underpinned by: 1) continued scale-up in commercial CMS, as management remains confident of the scaleup in FY27/28E, 2) improved development pipeline visibility, with management highlighting at least two new late phase projects, including peptide opportunities, which could support future commercial conversion; 3) expanding capability-led investments across peptides, complex molecules and capacity expansion, including Gland Pharma collaboration for sterile APIs. Management reiterated its medium-term aspiration of c.20% growth, while retaining caution on quarterly volatility.