Goldman Sachs has raised its price target on Neuland Labs after the pharmaceutical company's June-quarter earnings comfortably beat expectations, driven by robust growth in its Contract Manufacturing Services (CMS) business and improving momentum in its generics business.
The brokerage maintained its 'Buy' rating on the stock and increased its 12-month target price to Rs 23,300 from Rs 20,550, implying an upside of nearly 17% from current levels.
According to Goldman Sachs, Neuland's first-quarter performance came in well ahead of Street estimates, with revenue and EBITDA rising 119% and 546%, respectively. EBITDA margin expanded to 34.7% from 9.4% a year earlier, supported by higher gross margins and operating leverage.
CMS Business - The Standout
The standout performer was the CMS business, which contributed nearly 67% of quarterly revenue. Goldman Sachs said commercial CMS revenue rose sharply, with management indicating that growth was driven by a handful of commercial molecules that are expected to support revenue over the next two to three years. The brokerage noted that the active CMS project count increased to 99, including 19 commercial and seven pre-registration or registration projects, pointing to healthy execution visibility.
The Generics Drug Substances (GDS) business also showed signs of recovery, contributing about 26% of revenue and growing 17% year-on-year after declining in FY26. Management highlighted improving performance across both Prime and Specialty portfolios, with products such as Ezetimibe, Mirtazapine and Sterile Aripiprazole supporting growth.
The brokerage expects the company's growth trajectory to be supported by expanding commercial CMS operations, new late-stage development projects and the ongoing collaboration with Gland Pharma.
Management reiterated its medium-term aspiration of around 20% revenue growth, while maintaining EBITDA margin guidance above 25% over the long term.
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