Nuvama retains 'Buy' on Neuland Labs, sees CMS, peptide-driven growth

Nuvama Institutional Equities has maintained its 'BUY' rating on Neuland Laboratories stock with a target price of ₹22,130, based on 48x H1 FY28E EPS. The brokerage hosted the company at a domestic non-deal roadshow (NDR) that drew strong investor interest, with discussions centered on Neuland's contract manufacturing services (CMS) growth trajectory and its peptide capacity expansion plans.

 

Nuvama forecasts Neuland's revenue and profit after tax (PAT) to grow at a compound annual growth rate (CAGR) of 24 per cent and 49 per cent, respectively, over FY25–28E, driven by capacity utilisation improvements, portfolio expansion and new high-growth modalities.

Management reiterates 18–20% medium-term growth guidance

Neuland's management reiterated its medium-term growth guidance of 18–20 per cent CAGR (on an FY24 base), underpinned by improving capacity utilisation and expansion of its existing product portfolio. While the current portfolio is expected to deliver substantial growth, the company also anticipates adding one new molecule to its CMS business.

 

 

Management expressed confidence in maintaining its margin trajectory, with Earnings before interest, tax, depreciation and amortisation (Ebitda) margins expected to remain in the 25–30 per cent range over the medium term. The brokerage noted that Neuland's FY24–28E revenue and profit after tax (PAT) CAGR is projected at 16 per cent and 19 per cent, respectively, which is slightly below the company's guidance but still reflects strong growth momentum.  ALSO READ | Emirates NBD infusion to lift RBL Bank's growth prospects: Motilal Oswal

Peptide capacity: Long-term high-growth opportunity

Neuland is positioning itself as a differentiated player by focusing on complex molecules, particularly peptide Active Pharmaceutical Ingredients (APIs). The company is building a commercial-scale peptide manufacturing facility with a capex outlay of ₹250 crore. With global peptide capacity currently stretched due to demand from GLP-1 drugs, Neuland believes it is well placed to benefit from the anticipated shortage of peptide manufacturing capacity in the coming years.

 

The peptide facility is expected to become operational in about three years and has the potential to achieve roughly 2x asset turns while being margin-accretive to the overall business.  ALSO READ | Nuvama starts with 'Buy' on Yatharth Hospitals amid strong growth outlook

R&D expansion to enable research on new high-growth modalities

Neuland has announced a capex of ₹190 crore for a new R&D centre aimed at scaling up its research capabilities. Once completed, the company will relocate its R&D operations to a larger facility, expanding from the current 45,000 square feet to 135,000 square feet. This expansion is expected to facilitate research into new high-growth modalities and support the company's focus on complex API projects.

 

On the manufacturing front, Neuland has already expanded its Unit I from 8–10 acres to 22 acres over the past two years. Further expansion may be required as the company adds new blocks to support 16 projects currently in Phase II/III clinical trials. Management emphasised its long-term vision of focusing on complex API projects to deliver sustainable returns.

 

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