Neuland Labs gets capex nod lift; stock up 5% even as broader indices sink

Shares of Neuland Laboratories were trading higher by 5 per cent at Rs 13,915 on the BSE in Wednesday’s intra-day trade in an otherwise weaker broader market after the company’s board approved capital expenditure (capex) of Rs 342 crore. The company plans to fund this capex through debt and internal accruals. 

 

In comparison, at 11:15 AM; the BSE Midcap and Smallcap indices were down 1.6 per cent and 1.8 per cent, respectively.

 

Neuland is a pharmaceutical manufacturer providing active pharmaceutical ingredients (APIs), complex intermediates and custom manufacturing solutions services to customers located in around 80 countries.

 

The company said it will spend Rs 254 crore for development and commercial production of Peptides for Generic Drug Substances (GDS) and Custom Manufacturing Solutions (CMS) business. It will invest Rs 88 crore towards building an additional capacity of 52 KL in its Unit-3. This capacity is expected to come online in 15 to 18 months.

 

Considering the business opportunities and to capitalize on current capabilities, the company is planning to build a new Peptide block with significant peptide manufacturing capacity at its Unit-1, allowing the business to scale.  The board’s approval of this investment of Rs 254 crore will enhance the company’s Peptide Synthesizer reactor capacity from 0.5 KL to 6.37 KL, Neuland said in an exchange filing.

 

The company expects the project to be completed by FY27. This peptide manufacturing block will be a multi-product facility servicing the needs of both CMS and GDS customers. These investments are in line with the company’s long-term growth strategy as articulated in past communications, the company said.

 

Investor Mukul Mahavir Agrawal held 400,000 equity shares or 3.12 per cent stake in Neuland at the end of December 2024 quarter, the shareholding pattern data shows.

 

Meanwhile, currently, the stock price of Neuland is down 23 per cent from its all-time high level of Rs 18,089.95 touched on December 4, 2024. In the past one year, it zoomed 145 per cent, as compared to 8 per cent rise in the BSE Sensex.

 

In the July to September quarter (Q2FY25), Neuland reported 64.1 per cent year-on-year (YoY) decline in its net profit at Rs 32 crore, due to 25.1 per cent YoY fall in total income at Rs 315.20 crore. Earnings before interest, tax, depreciation and amortization (EBITDA) margin contracted 1260 bps to 20.8 per cent from 33.4 per cent in Q2FY24.

 

The management said the numbers of reported quarter were subpar relative to how the business has been performing over the last few quarters. The revenues during the quarter were driven by a few key molecules on the commercial CMS and GDS specialty side. Completion of additional manufacturing facilities in this year coupled with anticipated commercial launch of molecules on the CMS side gives us the confidence of achieving high growth in FY26 and beyond, the management said.