Cohance's Q2 FY26 performance was in line with brokerage's expectations, though the cut in FY26 guidance was disappointing. While pharma CDMO growth continues to be impacted by inventory destocking for two products, dip in sales of NJ Bio and API+ (-4% YoY) division was a surprise.
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Cohance Lifesciences Ltd.'s operating performance continues to be weak with revenue growing by mere ~1.2% while Ebitda/ PAT fell 29.6%/41.7% YoY in H1 FY26.
Revenue growth has been impacted due to a shipment delay in NJ Bio by two-three quarters. This coupled with inventory destocking of pharma contract development manufacturing organisation projects and pressure in API segment along with cost over runs have impacted its overall financial performance.
The company is also going through a management transition with the exit of the CEO. Cohance has hired a new COO and has made changes to the management structure with Chairman Mr Vivek Sharma taking complete control.
New order wins along with resumption of supplies for a couple of pharma CDMO projects is critical for a turnaround.
With elevated cost structure, we believe the company may take at least five-six quarters to restore its Ebitda margin back to FY25 levels.
We cut FY26/27E earnings by ~37–41% to factor in slower growth and lower margins. We now expect Cohance to register 11.3%/12.2%/7.8% revenue/Ebitda/PAT growth over FY25–28E.
At current market price, the stock trades at 57.5x FY27E and 39.2x FY28E earnings.
We downgrade to Reduce (earlier Buy) with DCF-based lower target price of Rs 640 (Rs 1,250 earlier).
Key upside risks:
Improvement in biotech funding environment, new order wins for commercial projects and M&As.
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