Neuland Laboratories Shares Jump To Highest In Nearly Four Years

Shares of Neuland Laboratories Ltd. rose to their highest since April 2017 after the bulk drugmaker guided for a double-digit revenue growth over the next three-five years.

“We at least expect to have 15-20% kind of revenue growth and aspire to be closer to 20% Ebitda margin,” Deepak Gupta, chief financial officer at the company, said on an analyst call after the third-quarter results.

The drugmaker's revenue rose 21% year-on-year to Rs 245.4 crore in the three months ended December. That compares with the Rs 183.3-crore consensus estimate of analysts tracked by Bloomberg.

• Its net profit more than doubled to Rs 26.7 crore, against the projected Rs 7.7 crore.
• Operating profit or Ebitda rose 65% over the year earlier to Rs 46.5 crore.
• Margin expanded more than 600 basis points to Rs 18.9%.

The company in its investor presentation said its unit-3 has begun commercial production and is currently exporting two active pharmaceutical ingredients. It expects unit-3 to be a major contributor to its growth.

“A lot of the growth in the next two to three years will be driven by capacities that exist in unit-3 as well as the capacities we would be creating in unit-3,” Joint Managing Director Davuluri Saharsh Rao said on the analyst call.

The company is also looking to reduce dependence on China for raw materials. By June 2021, it aims to cut reliance on China to less than 10% from more than 60% at one point.

Neuland's custom manufacturing solutions business has been built to scale and has begun to grow. “This year, our CMS business is about a third of the total business and it was probably at 25% last year. So we expect the proportion of the CMS business to the overall business to increase, but whether it will be 40% or 45% or 35% will depend on how these molecules scale up and become commercially successful,” Rao said.

Shares of Neuland gained as much as 10% in early trade on Wednesday to Rs 1,535 apiece. The stock is up for the third straight day.

Of the four analysts tracking the company, two have a ‘buy' rating, while one each say ‘hold' and ‘sell'. The stock trades 11.6% higher than its Bloomberg consensus 12-month price target of Rs 1,340.3 apiece.