Brokerage Goldman Sachs has maintained its buy rating on Neuland Laboratories Ltd. and raised its 12-month target price to Rs 19,550 from Rs 17,275. The current market price is Rs 17,100 and the upgraded target price implies an upside of around 14.3%.
The brokerage said Neuland's Q4 performance was well ahead of estimates which was led by a strong show in its Contract Development and Manufacturing Organisation business. Goldman Sachs said the company's sales and EBITDA grew 136% and 155% year-on-year, respectively, mainly driven by its top two commercial CMS projects. These projects helped the segment grow 366% year-on-year.
However, the Generic Drug Substance business was largely in line, as shipments slowed partly due to operational issues at a customer's end. The brokerage noted Neuland's Ebitda margin at around 40% and that it was significantly above its estimate.
The brokerage expects Neuland's topline growth to remain robust at over 20% CAGR during FY26-28E and expects the company to deliver more than 25% EBITDA CAGR over FY26-28E, mainly due to its profitable CMS and Specialty API mix.
It noted that Neuland has earlier guided for around 20% topline CAGR in the medium term while aiming to maintain margins in the 25-30% range.
The brokerage has raised its FY27-29 EPS estimates by up to 8% to factor in the Q4 beat, updated pipeline progress and revised business outlook shared by management.
The key risks flagged by Goldman Sachs include product, customer and geography concentration, execution risks in new businesses and complex products, and potential regulatory compliance issues.
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