1. At a Glance – The API Grinder with Mood Swings
SMS Pharmaceuticals Ltd is trading around ₹322 with a market cap of roughly ₹3,017 Cr, and the stock has been on a bit of a caffeine rush lately—up ~36% in the last six months and ~46% over one year. The headline story? A company that spent the last few years choking on margin pressure is finally breathing again. Q3 FY26 revenue came in at ₹210 Cr, up ~21% YoY, while PAT jumped ~36% YoY to ₹23.3 Cr. EBITDA margins, which once slipped to an ugly 16% in FY24 thanks to Ibuprofen debut disasters, have clawed back to ~19–21% territory in recent quarters.
Debt stands at about ₹324 Cr, promoter holding is a chunky ~68%, and yes—there’s promoter pledge (~18%), which always makes investors squint a little. ROCE is still a modest ~12%, not exactly Divi’s Lab territory, but this is not a sleepy API dinosaur anymore. With ₹150–250 Cr of capex underway, backward integration nearing completion, and product mix shifting away from margin-killer launches, SMS Pharma is clearly trying to rewrite its own script. The question is: is this a genuine turnaround arc or just a temporary sugar high?
2. Introduction – From Ibuprofen Blues to Margin Rehab
If SMS Pharma were a Bollywood character, FY22–FY24 would be its “struggling artist” phase. EBITDA margins fell from a respectable ~23% in FY22 to ~16% in FY24. Why? Two villains entered the scene: rising input costs and a newly launched Ibuprofen business that was sold at negative margins. Yes, negative. Basically, the company said, “Let’s sell more, even if it hurts,” and then wondered why profits limped.
Fast forward to 9M FY25 and Q3 FY26, and suddenly the vibe has changed. EBITDA margins recovered to ~18–21%, helped by backward integration, better product mix, and stabilization in Ibuprofen economics. PAT growth of ~37% TTM tells you something is clearly clicking again.
But don’t get too emotional yet. This is still a domestic-heavy API business (87% domestic revenue), with customer concentration risk (top 10 customers = 76% of FY24 revenue, top client alone = 23%). This is not a “set it and forget it” compounder. It’s more like a gym transformation—visible abs forming, but you still remember the belly.
So, are these margins sustainable? Or is SMS Pharma just enjoying a cyclical tailwind before
reality returns? Let’s dig.
3. Business Model – WTF Do They Even Do?
At its core, SMS Pharma is an API and intermediates manufacturer. No fancy branded drugs, no celebrity ads—just white powders and complex molecules that pharma companies can’t live without.
They operate across multiple therapeutic categories:
- Anti-retroviral
- Anti-diabetic
- Anti-migraine
- Anti-ulcer
- Anti-epileptic
- Anti-fungal, anti-viral, and more
The company claims global leadership positions in 10+ therapeutic products, with 45+ products, sold to 800+ customers across 75+ countries. That sounds impressive until you realize exports are only ~13% of revenue right now. Most of the business is domestic, supplying big pharma names like Cipla, Zydus, Alkem, Glenmark, Aurobindo, Johnson & Johnson, and Teva.
Manufacturing happens at two facilities:
- Hyderabad (~200 KL capacity)
- Vizag (~3,000 KL capacity)
Total capacity: ~3,200 KL. Vizag is the real muscle here.
The long-term strategy is classic API survival logic:
- Backward integration → reduce raw material dependency
- Scale up Ibuprofen → hit 1,000 MT/month
- Add 8–10 new products → diversify margin drivers
Simple model, execution-heavy business. No storytelling—just chemistry, compliance, and cost control.
4. Financials Overview – Numbers Don’t Lie (But They Do Smirk)
Quarterly Performance Snapshot
| Metric | Latest Qtr (Q3 FY26) | YoY Qtr | Prev Qtr (Q2 FY26) | YoY % | QoQ % |
|---|---|---|---|---|---|
| Revenue (₹ Cr) | 210 | 173 | 242 | 21.4% | -13.2% |
| EBITDA (₹ Cr) | 44 | 33 | 48 | 33.3% | -8.3% |
| PAT (₹ Cr) | 23.3 | 17 | 25.3 | 35.9% | -7.9% |
| EPS (₹) | 2.49 | 2.03 | 2.68 | 22.7% | -7.1% |
Yes, QoQ dipped. Before you panic, remember pharma quarters are rarely linear. What matters is margin direction—and OPM at ~21% is the best SMS has shown in years.
Annualised EPS (Q3 method):
Average of Q1–Q3 FY26 EPS ≈ (2.05 + 2.68 + 2.49) / 3
