Cohance Lifesciences' June-quarter performance left brokerages divided on the outlook after the company slipped into a loss, revenue contracted and EBITDA fell sharply. Macquarie expects earnings to recover sequentially from the September quarter and growth to return in the second half, while Jefferies remains cautious about the prospects of a sustainable near-term recovery.
The weakness extended across the business, with Macquarie attributing the revenue contraction mainly to the Pharma CDMO segment. Jefferies said sales declined across all three business divisions, leaving EBITDA close to break-even and raising concerns over the near-term growth outlook.
The quarter was materially weaker than expected, according to Macquarie. Cohance reported a net loss of Rs. 24.1 crore compared with a profit in the year-ago period, while revenue declined 23.1%. EBITDA fell 99%, resulting in a sharp contraction in operating margin.
Cohance Lifesciences Q1 Highlights (Consolidated, YoY)
- Net loss stood at Rs. 24.1 crore compared with a profit of Rs. 48.9 crore.
- Revenue declined 23.1% to Rs. 422 crore from Rs. 549 crore.
- EBITDA fell 99% to Rs. 1.2 crore from Rs. 112 crore.
- EBITDA margin contracted to 0.3% from 20.4%.
Management expects a sequential recovery in the September quarter and a return to year-on-year growth in the second half, according to Macquarie.
Separately, Cohance Lifesciences' Pashamylaram facility received five Form 483 observations following an inspection by the US Food and Drug Administration.
Here's what brokerages are saying after Cohance Lifesciences Q1 results announcement:
Macquarie
- Maintained 'Outperform'; Target Price At Rs. 1,150
- June-quarter performance was materially weaker than expected.
- Revenue declined mainly due to contraction in the Pharma CDMO segment.
- Management expects a sequential recovery in Q2.
- The company expects to return to year-on-year growth in the second half.
Jefferies
- Maintained 'Underperform'; Target Price Raised To Rs. 350 From Rs. 300
- Results were below estimates as sales declined across all three business divisions.
- Lower sales pushed EBITDA close to break-even.
- Jefferies sees challenges across the company's divisions.
- The brokerage lacks confidence in a sustainable near-term growth recovery.
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