At a Glance
Neuland Labs has turned heads with a 10x stock rally in 3 years, dominating the API space like a biotech boss. But with a P/E nearing 80 and FIIs piling in like it’s the next Divi’s, is it priced for perfection or due for a dose of reality?
1. 🍊 TL;DR (Too Long; Diagnosed Rapidly)
- Stock: ₹12,245 (5Y CAGR: 93%, 3Y CAGR: 127%)
- Revenue (FY20 to FY25): ₹763 Cr → ₹1,477 Cr
- PAT (FY20 to FY25): ₹16 Cr → ₹260 Cr — 16x jump!
- Operating Margin: Exploded from 13% to 30% in FY24, now normalized to 22%.
- Promoter Holding: Down from 36% to 32.7%. FIIs up from 17% to 22%.
- Valuation: P/E 77x | P/B 10x | Dividend Yield: A pity 0.1%
2. 🪨 Business Model: APIs, but with Attitude
Neuland makes Active Pharmaceutical Ingredients (APIs), aka the real stuff behind your tablets. Their focus is on:
- Prime APIs: High volume but low margin molecules (Levetiracetam, Mirtazapine)
- Specialty APIs: Complex and high-margin products – this is where the magic (and valuation) lies
- CMS (Custom Manufacturing): Like TCS for pharma — white-label manufacturing for global giants
Think of it as:
- Prime: Paracetamol of the portfolio
- Specialty: Designer drugs with premium pricing
- CMS: Outsourced chemistry as a service
They supply to over 80 countries and are known for DMF filings, cGMP compliance, and zero tolerance for shoddy QC (unlike a certain Wockhardt we won’t name).
3. 📈 Financials: Straight Outta Lab with 66% Profit CAGR
5-Year Snapshot (Consolidated):
| Metric | FY20 | FY25 | CAGR |
|---|---|---|---|
| Revenue | ₹763 Cr | ₹1,477 Cr | 14% |
| EBITDA | ₹102 Cr | ₹323 Cr | 26% |
| PAT | ₹16 Cr | ₹260 Cr | 66% |
| EPS | ₹12.63 | ₹202.74 | ~60% |
| ROCE | 8% | 18% | Doubled |
Quarterly Red Flags (Mar 2025):
- Sales dipped to ₹328 Cr vs peak of ₹440 Cr
- OPM collapsed to 16% from 30%
- PAT down to ₹28 Cr vs ₹102 Cr in Dec 2024
Basically, Q4 FY25 said: “Hype mila, margin gaya.”
4. 📊 Valuation: Divi’s Ka Chhota Bhai, Price Mein Bada Bhai?
| Metric | Neuland | Divi’s Lab |
| P/E | 77x | 79x |
| Market Cap | ₹16,000 Cr | ₹175,000 Cr |
| ROCE | 18% | 20% |
| OPM | 22% | 30% |
| Growth (5Y Profit CAGR) | 66% | 12% |
So yes, it deserves a higher P/E than average pharma peers like Sun/Cipla. But Divi’s-level multiple? Debatable. Especially when FY25 ended with a slump.
5. 🧬 Shareholding Drama: Promoter Exit, FII Entry
| Entity | FY22 | FY25 |
| Promoters | 36.2% | 32.7% ⬇️ |
| FIIs | 17.4% | 22.1% ⬆️ |
| DIIs | 6.4% | 10.9% ⬆️ |
| Public | 40% | 33.8% ⬇️ |
- Promoters have trimmed ~4% stake in 3 years
- FIIs have doubled down, with Goldman & Fidelity among recent meet attendees
- SEBI just issued a warning on insider trading to a designated person (no material impact but flags raised)
6. 🪤 Fair Value: Science Meets Sanity
Let’s apply a sanity test:
- FY25 EPS: ₹203
- Assuming 25% growth in FY26: ₹253
- Fair P/E Range (35x to 45x for high-margin pharma):
📈 Fair Value = ₹8,800 – ₹11,400
At CMP ₹12,245, the stock is priced slightly ahead of its earnings curve. Unless margins bounce back to 30%+, FY26 could disappoint those expecting another rocket.
7. 🧠 Final Dose
- Neuland is no joke — it’s built a real, high-quality, API + CMS powerhouse
- 10x in 3 years? Earned.
- But FY25 ending shows cracks: Margin cooling, quarterly slump, promoter trimming
- FIIs still love it. But FIIs also loved Zomato at 140.
Verdict: Great company. Expensive stock. Don’t let your heart overtake your chemistry.
Tags: Neuland Labs, Pharma Stocks India, API Manufacturers, Divi’s Labs Comparison, High P/E Stocks, NSE Nifty 500 Pharma, Insider Trading SEBI, FII Favourite Stocks
✍️ Written by Prashant | 🗓️ 21 June 2025
