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Laboratoires Neuland share price hit a new high of Rs 14,500 on the BSE on Friday, up 16 per cent intraday. The shares, however, closed 12.8 per cent higher at Rs 14,100 on the BSE on expectations of strong earnings for the September quarter (Q2FY25). In comparison, the BSE Sensex ended 0.28 percent lower at 81,381.
Over the past four months, the Neuland Labs share price has more than doubled, soaring 122%, as the company reported strong profits for the June 2024 quarter (Q1FY25). Since September 9, 2022, in the last 25 months, it has soared 1,100%, or 12 times, from a level of Rs 1,201 on the BSE.
Investor Mukul Mahavir Agrawal held 400,000 shares, representing 3.12 percent stake in Neuland Lab at the end of the June quarter, according to shareholding structure data.
The company has not yet disclosed its shareholding breakdown for the quarter ending September 2024.
Neuland Labs is a pharmaceutical manufacturer providing customers with active pharmaceutical ingredients (APIs), complex intermediates and custom manufacturing solutions (CMS).
The company recorded its highest ever quarterly revenue in Q1FY25 at Rs 444.4 crore, driven by growth in the CMS business. The company reported healthy earnings before interest, taxes, depreciation and amortization (Ebitda) margins at 28.9%, up 174 basis points from Q1FY24. Profit after tax jumped by 58 per cent year-on-year to Rs 98.3 crore from Rs 62.2 crore in the year-ago quarter.
Management said the company continues to maintain that FY25 will be a year of normalization of revenue growth and, therefore, margins, as the company continues to invest for growth. The management expects the company’s operations to regain momentum from FY26, based on its visibility through the company’s project and product portfolio.
“As we evaluate our project portfolio and the flow of new projects, we remain enthusiastic about the strong potential of the CMS business over the long term. The Generic Drug Substances (GDS) business continues to build on the strong foundation we have in quality for targeted customers, even as our R&D team works on an exciting set of molecules to add to our portfolio,” said management when announcing its first quarter FY25 results on August 1.
Meanwhile, the API market in the CDMO sector is likely valued at $118.09 billion in 2024 and is expected to reach $178.47 billion by 2029. This growth represents a compound annual growth rate (CAGR) by 8.61% from 2024 to 2029.
“There has been a notable trend towards increased outsourcing to CDMOs in the pharmaceutical industry. This shift allows businesses to take advantage of the expertise, flexibility, and specialized skills offered by CDMOs. Organizations of all sizes, from small drug developers to large pharmaceutical and biopharmaceutical companies. companies covering early and late-stage development projects are adopting this outsourcing strategy,” Neuland Lab said in its FY24 annual report.
The revenue contribution of niche APIs and CMS will continue to increase over the next three years, while that of the premium API segment is expected to remain around 25 percent. Healthy relationships with major pharma players and strong R&D capabilities ensure a healthy operating margin, according to CRISIL Ratings.
The group caters to customers in India and abroad. It derives more than 80 percent of its revenue from exports. In the CMS sector, 100% of revenue comes from regulated markets, such as the United States, Europe and Japan. The diversity of geographic reach and customer base will continue to support the risk profile of companies, the rating agency had indicated in its justification dated March 27, 2024.
First publication: October 11, 2024 | 3:53 p.m. STI