Neuland Laboratories Limited – Transformation towards niche APIs?

Overall long term view for Neuland :

1. Company is net debt free (long term as well as short term) as it is having casah more than borrowings.

2. Company is generating around 75 Cr free cash flow every quarter.

3. The free cash flow generated by the Company is sufficient to take care of maintenance capex as well as growth CAPEX.

4. Management has proven its integrity and is having a very good sense of efficient Capital allocation.

5. Management track record is of being very conservative/efficient for CAPEX.

6. Management had historically been conservative in giving future guidance.

7. Business has over a period of time has evolved for high margin business.

8. Management has a very focussed approach and clarity about future business.

9. Management is constantly evolving itself to adapt to the new business enviorment.

10. Managment is well aware of the various kind of risk involved in the business and is constantly monitoring and reviewing the same.

11. There is a sector tailwind and company is well positioned and adequately capitalized and leveraged to take advantage of the same. Company is well positioned to fund its growth from all means internal accruals, Equity, Debt. Interanl accrauls are sufficient to take care of 15 to 20% growth for 5 to 6 years.

12. CDMO sector has a very long run way and visibility for at least 10 years.

13. Track record of the Company has given it a recognition in the CDMO sector and this is going to further evolve and improve in coming years.

14. Commercialization of some key molecules in next 12 to 24 months will further establish the brand image of Neuland and more molecules may come for development from existing as well as new molecules.

15. Approval and commercialization of block buster drug KARXT in Sept 24 will be a big booster for the Company both in terms of revenue as well as establishing its credibility in the CDMO sector.

16. Neuland has been associated with Karuna Theuraptics for development of KARXT drug. Acquisitinon of Karuna Therauptics by Bristol Myer was mainly for the single drug KARXT. Bristol Mayer is very big name in big pharma and going forward in next 5 years , we can see sourcing of development of new molecules to Neuland not only from small Biotech Companies but also from big pharma. Market cap of Bristol Myer is around USD 100 Billion.

17. DII holding is very less at around 6.39 % and will give support during any major downfall.

Disclosure: Invested and views are fully biased. Holding for last 3 years and will hold for next 5 years from here.