Neuland Laboratories Limited — Q2 FY26 earnings call

Call held 7 Nov 2025

Management summary

Neuland Labs delivered a record-breaking performance in Q2 FY26, with revenue and profitability soaring due to strong execution in its commercial CMS business. The impressive top-line growth of 63.7% and an EBITDA margin of 30.4% highlight significant operating leverage. However, this rapid growth strained working capital, leading to higher inventory, increased receivables, and negative cash flow. Management remains confident in the full-year outlook, emphasizing the long-term potential of its peptide facility investments and a strengthening project pipeline, while cautioning investors about the inherent quarter-to-quarter volatility of the business.

Highlights

  • Total Income surged to ₹516 crores, a 63.7% YoY increase from ₹315 crores in Q2FY25.

  • EBITDA stood at ₹156.9 crores, with a robust EBITDA margin of 30.4%.

  • Profit After Tax (PAT) grew significantly to ₹96.5 crores, compared to ₹32 crores in the same period last year.

  • Earnings Per Share (EPS) for the quarter was ₹75.18.

  • Gross Margin improved to 60.1% from 56.3% in Q2FY25, driven by a favorable business mix tilting towards CMS.

  • Growth was primarily driven by the strong performance of the top two commercial CMS molecules.

  • Working capital deteriorated, with working capital days at 155 and a negative pre-cash flow of ₹141 crores for the quarter.

  • Management reiterated its expectation for a year of strong growth in FY26.

Concerns

  • Working Capital Deterioration & Negative Cash Flow

Key financials

  1. Total Income ₹516 Cr +63.7%YoY
  2. EBITDA ₹156.9 Cr
  3. EBITDA Margin 30.4%
  4. Gross Margin 60.1%
  5. PAT ₹96.5 Cr +201.5%YoY
  6. EPS ₹75.18

What they filed

Q1 FY27: revenue up 119.1%, net profit up 950.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue311 398 328 293 514 +65%440 +11%776 +137%642 +119%
EBITDA61 86 51 34 155 +154%77 −10%307 +502%223 +556%
Net profit32 101 28 14 96 +200%40 −60%213 +661%147 +950%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Guidance & targets

Growth

  • Full Year Growth Growth · FY26 · High confidence Strong growth on a base of FY24
    But what I would just like to reiterate is that we had indicated that FY'26 will be a year of strong growth on a base of FY24, not FY25. So, we stand by that and I think maybe this quarter also is kind of an indicator that we are in that direction.

    — Saharsh Davuluri, Vice Chairman & Managing Director

Pipeline

  • New Molecule Commercialization Pipeline · FY26 · High confidence Commercialization of one new molecule
    In line with our expectations, we should see the commercialization of another molecule this year.

    — Saharsh Davuluri, Vice Chairman & Managing Director

Capex

  • Peptide Facility Completion Capex · next financial year · High confidence New peptide facility to be completed
    We will continue to update you on progress we are making on this front, even as we expect the new peptide facility to be completed in the next financial year.

    — Saharsh Davuluri, Vice Chairman & Managing Director

  • Peptide Facility Investment (Module 1 & 2) Capex · current phase · High confidence ₹250-280 crores
    I think for the Peptide, the Module-1, along with civil for Module-2, I think we are looking at ballpark Rs. 250 crores-Rs. 280 crores of investment.

    — Saharsh Davuluri, Vice Chairman & Managing Director

Risks & concerns

  • Working Capital Deterioration & Negative Cash Flow

    high

    Management confirmed deterioration due to higher inventories and receivables, leading to a negative pre-cash flow of ₹141 crores. They are actively working on optimization.

    Management acknowledged

  • Business Lumpiness and Quarter-on-Quarter Volatility

    medium

    Management repeatedly cautioned that the CDMO business is inherently uneven and should be evaluated on an annual basis, not quarterly.

    Management acknowledged

  • External Factors

    medium

    Risks include customer R&D failures, FX fluctuations, raw material cost volatility, and geopolitical issues.

    Management acknowledged

Areas of evasion (2)

  • Product-specific details (utilization, pricing)
  • Specific quantitative capacity of peptide facility

Q&A highlights

1 direct, 1 evasive
Peptide (GLP-1) API Capacity Partial
So, unfortunately, I think it's very difficult to answer what the capacity of this facility would be in terms of kilos or tons of peptide. But the largest reactor we plan to have is 2,000-liter SPPS.

Management avoided giving a specific capacity number for the highly anticipated peptide/GLP-1 space, highlighting that output is process-dependent, which makes it difficult for investors to model the potential revenue contribution.

Asked by Amey

Product-Specific Details on CMS Molecule (Bempedoic Acid) Evasive
Unfortunately, we won't answer product specific questions on the CMS side, so we won't be able to answer any of those questions. Apologies for that.

This is a clear refusal to provide any details on a key commercial product, demonstrating a strict policy on customer confidentiality that limits investor visibility into specific growth drivers.

Asked by Rusmik Oza

Rationale for R&D Headcount Increase Amidst Low Pipeline Count Direct
We have several new projects that have entered the system in the last 6 to 8 months. But many of these projects are still in process development, in scale-up, and they have not been shipped or built, so to speak. Therefore, you are not seeing them in the count of the table.

This question addressed a potential disconnect in the data, and management's response clarified that the increased headcount is a leading indicator of future growth, with the project pipeline stronger than what is currently reported.

Asked by Sajal Kapoor

2 min read 5 chapters

Detailed narrative

Record Q2 Performance Driven by Commercial CMS

Neuland Labs reported its best-ever quarter, with total income reaching ₹516 crores, a 63.7% YoY growth. This surge was primarily driven by strong performance from its top two commercial CMS molecules. The favorable business mix and operating leverage resulted in a robust EBITDA margin of 30.4% and a PAT of ₹96.5 crores. Management highlighted that this performance is an indicator of the strong growth trajectory expected for the full financial year FY26.

Working Capital Under Strain Amidst High Growth

The rapid growth in Q2 led to a significant strain on working capital. Management acknowledged a deterioration over the last two quarters, with working capital at 155 days of sales. This was caused by higher inventories built up for future orders and uneven order flow leading to higher receivables. Consequently, the pre-cash flow for the quarter was negative at ₹141 crores. The company is now focused on inventory optimization and achieving a more even delivery flow to improve the cash position.

Strategic Investment in Peptide Manufacturing Deepens

The company is moving forward with its strategic investment in a large-scale, four-module peptide facility. Management confirmed that Module-1 will be fully operational by the next financial year, with civil work for Module-2 also underway. The initial investment for this phase is estimated to be between ₹250-280 crores. This facility is crucial for attracting large-scale commercial peptide projects, a key long-term growth driver for the company.

GDS Business Shows Mixed Performance

The Generic Drug Substances (GDS) business had a mixed quarter. The prime products segment, including Ezetimibe and Mirtazapine, delivered good contributions. However, the GDS specialty segment was described as 'subdued', with contributions from sterile products like Paliperidone and Aripiprazole. This indicates that while the CMS business is firing on all cylinders, the GDS segment's growth is less uniform.

Outlook: Confident on FY26 Growth but Cautious on Volatility

Management reiterated its confidence that FY26 will be a year of 'strong growth' compared to the FY24 baseline. This is supported by the expected commercialization of another CMS molecule this year and a strong pipeline of new business with deliveries scheduled over the next 12-18 months. However, they repeatedly cautioned investors about the 'inherent uneven nature' and 'lumpiness' of the CDMO business, advising a long-term, annual perspective rather than focusing on quarter-on-quarter fluctuations.

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