1. At a Glance
Quest Laboratories posted a Q1 FY26 net profit of ₹4.1 Cr (up 177% QoQ), while also pulling a surprise land acquisition worth ₹3.2 Cr — because nothing says “growth” like buying land after an earnings beat. Sales, margins, and EPS all improved. Stock, meanwhile, down 1.8%. Because SME investors can’t have nice things.
2. Introduction with Hook
Imagine if your family chemist store decided to go public, flexed 800 licensed formulations, and then bought land for expansion — all while being smaller than the average Bollywood vanity van budget.
That’s Quest Labs.
With over 272 active products, a Myanmar export order book, and enough formulations to confuse a pharmacology textbook — QLL is punching above its ₹170 Cr weight class.
3. Business Model (WTF Do They Even Do?)
Quest Labs runs a buffet-style pharma business:
- Manufactures generics, OTC, and ethical formulations across antibiotics, antimalarials, anti-inflammatories, respiratory meds, diabetes care, and more.
- Formats include: tablets, liquids, powders, ointments, ORS — basically everything except injectables.
- Sales channels: Institutional, PCD (Propaganda Cum Distribution), Contract Manufacturing, Domestic & Exports (Myanmar flex alert).
They’re like that overachieving kid in school — not top of the class, but quietly doing 20 subjects well.
4. Financials Overview
| Quarter | Revenue | EBITDA | PAT | OPM | EPS |
|---|---|---|---|---|---|
| Q1 FY25 | ₹15.25 Cr | ₹1.78 Cr | ₹1.48 Cr | 11.7% | ₹0.90 |
| Q4 FY25 | ₹46.45 Cr | ₹0.81 Cr | ₹1.94 Cr | 1.74% | ₹1.18 |
| Q1 FY26 | ₹23.18 Cr | ₹3.82 Cr | ₹4.10 Cr | 16.48% | ₹2.50 |
Commentary:
- EBITDA and PAT improved significantly.
- Sequential OPM jumped from 1.7% → 16.5%.
- EPS nearly tripled QoQ.
- FY25 was volatile, but FY26 is off to a clean start — like a detox for the balance sheet.
5. Valuation
Fair Value Range:
| Method | Assumption | Range |
|---|---|---|
| P/E Basis | 15x FY26E EPS of ₹10 | ₹135–₹150 |
| EV/EBITDA | 10x FY26E EBITDA of ₹17 Cr | ₹125–₹140 |
Current Price: ₹106
P/E: 12.8x
Verdict: Looks undervalued if the earnings trend continues. But don’t forget — it’s an SME stock. Volatility comes free.
6. What’s Cooking – News, Triggers, Drama
- Q1 FY26 net profit: ₹4.10 Cr (vs ₹1.94 Cr QoQ)
- Land purchased: ₹3.21 Cr for facility expansion. Because why wait for government subsidies when you can YOLO capex?
- Delayed director resignation disclosure: NSE slapped wrists. Board promised to behave.
- FY25 CFO: -₹23 Cr — ouch. FY26 Q1: positive signs.
- Myanmar export order book: ₹25 Cr+
Drama meter: Low flame, but things are simmering.
7. Balance Sheet
FY25 Standalone Snapshot (₹ Cr):
| Item | Value |
|---|---|
| Equity | ₹16 Cr |
| Reserves | ₹65 Cr |
| Total Borrowings | ₹30 Cr |
| Fixed Assets | ₹12 Cr |
| Investments | ₹52 Cr |
| Total Assets | ₹122 Cr |
Takeaway:
- Investments: ₹52 Cr — that’s nearly 1/3rd of total assets.
- Debt creeping up (₹5 Cr → ₹30 Cr) — expansion coming?
- Clean capital structure, no CWIP yet, but that might change soon.
8. Cash Flow – Sab Number Game Hai
| Year | CFO | CFI | CFF | Net |
|---|---|---|---|---|
| FY24 | ₹3 Cr | ₹-5 Cr | ₹2 Cr | ₹0 Cr |
| FY25 | ₹-23 Cr | ₹-44 Cr | ₹67 Cr | ₹-0 Cr |
Cash flow commentary:
- FY25: Spent ₹44 Cr investing, mostly in mystery category (probably the ₹52 Cr investments)
- Raised ₹67 Cr in financing (equity, loans or IPO)
- Operating cash flow tanked — working capital drag?
9. Ratios – Sexy or Stressy?
| Metric | FY25 |
|---|---|
| ROCE | 26.9% |
| ROE | 24.6% |
| OPM | 15% |
| D/E | 0.46 |
| P/E | 12.8x |
Verdict:
Very decent ROE/ROCE for an SME pharma. And P/E under 13? Not bad. D/E < 0.5? Pretty conservative.
Now if they’d just fix working capital days…
10. P&L Breakdown – Show Me the Money
| Year | Revenue | EBITDA | PAT |
|---|---|---|---|
| FY21 | ₹30 Cr | ₹1 Cr | ₹1 Cr |
| FY22 | ₹59 Cr | ₹6 Cr | ₹4 Cr |
| FY23 | ₹62 Cr | ₹8 Cr | ₹5 Cr |
| FY24 | ₹83 Cr | ₹16 Cr | ₹10 Cr |
| FY25 | ₹104 Cr | ₹16 Cr | ₹14 Cr |
Growth looks like a staircase — slow, steady, with no fancy drama. Which is rare in pharma.
11. Peer Comparison
| Company | Rev (₹ Cr) | PAT (₹ Cr) | P/E | ROE |
|---|---|---|---|---|
| Sun Pharma | 52,578 | 2,389 | 35.4 | 16.9% |
| Divi’s Labs | 9,360 | 2,190 | 80.2 | 15.4% |
| Cipla | 27,547 | 5,142 | 23.3 | 17.8% |
| Quest Labs | 104 | 14 | 12.8 | 24.6% |
Looks like the guy showing up to an Ivy League reunion wearing Bata chappals — but still topping the ROE class.
12. Miscellaneous – Shareholding, Promoters
| Category | Mar 2025 |
|---|---|
| Promoters | 66.2% |
| FIIs | 0.95% |
| DIIs | 2.07% |
| Public | 30.77% |
Good promoter skin in the game, but also…
- FIIs/DIIs tiny — which means volatility is high.
- Retail holding up sharply since IPO.
Also:
- No dividends
- 1000+ shareholders now. SME crowd is expanding.
13. EduInvesting Verdict™
Quest Labs is a well-behaved, quietly profitable SME pharma player that just clocked its best-ever quarter, announced expansion, and still trades at a 12x P/E.
Risk? Plenty. But potential? Definitely.
If this were a tablet, it’d be a slow-release capsule — nothing flashy, but delivers results over time.
Metadata:
Written by EduInvesting Team | 24 July 2025
Tags: Quest Laboratories, SME Pharma, Q1 FY26, Results, EduInvesting Premium
