This Mukul Agrawal-owned pharma stock has zoomed over 200% in 9 months

Neuland Lab hit a new high of Rs 6,910, rallied 6% after reported robust earnings with profit after tax more than doubled to Rs 80.7 crore in Q3FY24, on back of healthy operational performance.

Shares of Neuland Laboratories hit a new high of Rs 6,910, as they rallied 6 per cent on the BSE in Friday’s intra-day trade on back of healthy operational performance. The company reported robust earnings with profit after tax (PAT) more-than-doubled at Rs 80.7 crore in December quarter (Q3FY24). The pharmaceutical company had posted PAT of Rs 30.4 crore in a year ago quarter (Q3FY23).

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’s total income grew 46.2 per cent year-on-year (YoY) to Rs 394.9 crore. Reported earnings before interest, tax, depreciation, and amortisation (Ebitda) margin improved 1,080 bps to 31.1 per cent as a factor of the business mix as well as improved operational leverage, the company said.

In past nine months, the stock price of Neuland has zoomed 225 per cent. Mukul Agrawal, a renowned investor in India who specializes in microcaps and smallcaps, holds 3.12 per cent stake in the company.

Kedia Securities Private Limited, which is headed by Dr Vijay Kedia, holds 1.25 per cent stake in Neuland at the end of December quarter, the shareholding pattern data shows.

Meanwhile, India Ratings and Research (Ind-Ra) has upgraded the credit rating assigned to the company’s instrument with a stable outlook.

The upgrade reflects continued improvement in Neuland’s business profile during FY23-H1FY24 due to a sustained rise in the share of high-margin custom manufacturing services (CMS) business, led by both development and commercial projects. Furthermore, Ind-Ra expects the Ebitda margin to remain healthy over the medium-to-long term, given the strong pipeline of molecules in the development (15) and commercial (19) stage.

According to the management, the revenue contribution from the CMS segment will be around 50% over the next three-to-four years. In the CMS segment, the entire revenue is derived from the regulated markets of the US, Europe and Japan. The company has been focusing more on phase-III and development stage molecules as they are the probable candidates to drive the company’s revenue growth. Ind-Ra believes the company has sufficient financial flexibility to absorb the partially debt-funded capital expenditure to meet the business growth over FY24-FY27.

However, the company’s audits by the United States Food and Drug Administration (USFDA) have been delayed in the last three years on account of the pandemic-led disruptions. Hence, the agency expects the USFDA’s scrutiny of Indian manufacturing facilities to increase significantly over the near term. Ind-Ra highlights that non-compliance or data integrity issues with any manufacturing facility might affect new product approvals from several regulatory agencies or could lead to the shutdown of the facility, Ind-Ra said in rating rationale.