Neuland Laboratories Limited Q3 FY26 Earnings Call Summary

Summary

Neuland Laboratories Limited - Q3 FY26 Earnings Call Summary Monday, February 09, 2026 4:00 PM

Event Participants

Executives 3 Abhijit Majumdar (CFO), Saharsh Davuluri (Vice-Chairman and Managing Director), Sajeev Emmanuel Medikonda (Head, Corporate Planning and Strategy)

Analysts 8 Aanchal Jalan, Amey Chalke, Chirag Shah, Dheeresh Pathak, Harshit Dhoot, Pratiti, Rikin Shah, Ritika Agarwal, Sajal Kapoor, Shyam Srinivasan

Financials & KPIs

Geographic & Segment Commentary

• Custom Manufacturing Solutions (CMS): Accounted for over 50% of Q3 revenue. While commercial molecules saw traction, the absence of a specific high-margin product and long gestation periods led to a “lumpy” quarter.
• Generic Drug Substances (GDS) - Prime: Ezetimibe and Mirtazapine remain the key volume drivers. This segment remains competitive but provides a stable base for the company’s manufacturing footprint.
• Generic Drug Substances (GDS) - Specialty: Performance was mixed; Apixaban and Donepezil contributed positively, but Paliperidone faced a significant delay due to operational issues at the customer’s end.

Company-Specific & Strategic Commentary

• Peptide Modality: Management is investing in large-scale peptide manufacturing (Unit 3) and a modern R&D setup in Genome Valley. They are engaging with 5-6 innovators and big pharma, targeting a commercial NCE contract by FY27.
• R&D Campus Shifting: The Board approved moving R&D to a state-of-the-art campus to support complex process development and scale-up, positioning Neuland as an integral partner for innovators.
• Portfolio Transition: The company has shifted focus from low-margin high-volume APIs (like Ranitidine) to complex NCE molecules. Current strategy prioritizes quality of projects and well-funded innovators over sheer volume.
• Capacity Expansion: The Unit 3 capacity expansion is complete and ramp-up has started. This facility supports larger CMS shipments, with individual orders now reaching ₹50-₹100 crores.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

Margin Volatility

• Question: Why are gross margins lower despite a high CMS revenue share? (Amey Chalke)
• Answer: Growth was offset by the absence of one specific high-margin CMS product and a high-margin specialty GDS product (Paliperidone). Management maintains that CMS margins remain structurally higher than Prime GDS. (Saharsh Davuluri)

Peptide Strategy

• Question: What gives confidence in the peptide capex? (Shyam Srinivasan)
• Answer: Innovators are seeking capacity due to “saturation” in the West. Neuland is building a unique configuration by combining a new R&D center with large-scale manufacturing to attract big pharma. (Saharsh Davuluri)

Inventory Build-up

• Question: Is the profit growth just a result of inventory gains? (Aanchal Jalan)
• Answer: No. Inventory days increased from 94 to 124 as a precursor to expected revenue ramp-ups. It is a transitionary phase to ensure supply for upcoming customer deliveries. (Abhijit Majumdar)

Long-term Vision

• Question: Where is Neuland in its business cycle? (Harshit Dhoot)
• Answer: Early part of the growth phase. Growth for the next 2-3 years is “preordained” by existing molecules; the next decade depends on peptides and potentially geographic expansion into the US/EU. (Saharsh Davuluri)

Key Takeaway

Neuland Laboratories reported a quarter of moderate 11.4% YoY revenue growth, though margins were squeezed by an unfavorable product mix and a one-time labor code impact of ₹10 crores. The company is actively transitioning toward a high-value CDMO model, with CMS now contributing over 50% of revenue and individual shipments scaling to the ₹50-100 crore range. Strategically, the focus is on commissioning the large-scale peptide facility by July 2026 and migrating R&D to a new state-of-the-art campus to deepen partnerships with big pharma. Despite current working capital expansion to 145 days, management remains confident in a 20%+ long-term CAGR and a return to 30% EBITDA margins as new CMS molecules and Unit 3 capacities ramp up. Investors should monitor the normalization of inventory levels and the successful commercialization of the peptide pipeline in FY27 as key growth catalysts.