Pharma stock up 37% in 6 mths; Nuvama initiates with 'Buy', eyes 29% gains

Nuvama on Neuland Laboratories: Shares of pharmaceutical company Neuland Laboratories may stay in focus after domestic brokerage Nuvama initiated coverage on the stock with a bullish outlook. The brokerage expects a further upside of nearly 29 per cent and has assigned a target price of ₹17,700 per share.

 

Notably, Neuland shares have rallied 36.9 per cent in the past six months. In the previous session, the stock ended 4.70 per cent higher at ₹14,355.70 per share. By comparison, the BSE Sensex closed 0.51 per cent higher at 80,567.71 levels.

 

According to Nuvama analysts Shrikant Akolkar, Aashita Jain and Gaurav Lakhotia, the company is positioned for robust growth over the medium-term, driven by capacity expansion and product additions. 

 

 

“We think Neuland’s growth would take off in H2FY26E due to the recent capacity expansion at unit III. We reckon in a revenue/Ebitda/PAT CAGR of 21 per cent/37 per cent/45 per cent over FY25-28E; initiating coverage at ‘Buy’ with a target price (TP) of ₹17,700, valuing the stock at 44x September-27E EPS (in line with peer average),” they said in a note dated September 3.

 

CMS segment: Key driver of growth

 

Neuland’s Contract Manufacturing Solutions (CMS) business is expected to be the main growth lever, with revenues projected to grow 2.6 times between FY25 and FY28, analysts said. The ramp-up of Bempedoic acid and Xanomeline, along with the addition of two new products, are seen as the primary contributors.

 

Nuvama highlighted that Neuland has increased its Bempedoic acid manufacturing capacity from 50T to 150T, which could potentially triple revenues from the product. Growth is also expected to come from label expansion and regulatory approvals across key markets, including Japan, Canada, Israel and Australia/New Zealand. At the same time, performance in Xanomeline is likely to benefit from growth in BMS’s Cobenfy, with Neuland acting as the exclusive supplier. 

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Unit III expansion: Underutilised capacity a growth lever

 

The company has expanded overall capacity from 901KL in FY24 to 1,175KL in FY25, largely driven by an expansion at unit III, where capacity rose to 536KL. However, utilisation at the facility remains below 40 per cent, indicating major headroom for growth, analysts said. Therefore, Nuvama estimates that Neuland could achieve a peak net asset turnover of 2.5–3x compared with 2.3x in FY25, providing strong revenue visibility till FY28.

 

Peptides: The next growth leg

 

Looking beyond FY28, Neuland is also building capabilities in the peptides segment. The company has invested around ₹250 crore at unit I to expand reactor capacity from 0.5KL to 6.37KL by FY27E, enabling it to cater to both clinical and commercial stage peptide requirements. At this level of capex, peptides would account for nearly 20 per cent of its FY27E gross block, underscoring its importance as a long-term growth driver.

 

Outlook and risks

 

Analysts at Nuvama noted that Neuland’s “non-linear growth is evolving with new products, capex and capabilities” and argued that the company is nearing an inflection point in terms of growth and profitability. 

 

However, they flagged risks such as product and customer concentration, potential product destocking, litigation involving innovators’ products and regulatory challenges.