Add Concord Biotech Ltd for Target Rs. 1,400 by Choice Institutional Equities
Growth to Moderate; Execution Remains Key
We believe that, while the company will continue to grow, the pace is likely to moderate, reflecting challenges faced in H1. Although the management guides for some recovery in H2, we believe the company may still fall short of its earlier 25% three-year CAGR target under the current trajectory. While tariffrelated uncertainty is now behind us, the scaling up of orders and tender wins remains a key monitorable for sustained growth. We also expect near-term margin contraction, driven by facility ramp-up cost, with normalisation likely in FY27. That said, we remain watchful for a meaningful contribution from the injectables facility to support recovery. Accordingly, we have revised our FY26/27E estimate downwards by 12.3%/9.1% and continue to value the stock at 30x the average of FY27–28E EPS. This results in a revised target price of INR 1,400 (from INR 1,615) and we maintain our ADD rating.
Revenue Growth Healthy; PAT Miss Weighs on Quarter
* Revenue grew 13.7% YoY and 12.4% QoQ to INR 2,778 Mn (vs. CIE estimate: INR 2,808 Mn).
* EBITDA grew 1.0% YoY and 11.9% QoQ to INR 990 Mn (vs. CIE estimate: INR 989 Mn); margin contracted 447 bps YoY and 18 bps QoQ to 35.6% (vs. CIE estimate: 35.2%).
* PAT de-grew 16.2% YoY but expanded 0.9% QoQ to INR 636 Mn (vs. CIE estimate: INR 721 Mn).
API: H1 Headwinds to Weigh in on FY26; H2 Improvement Likely
While the API segment witnessed a modest recovery in this quarter, we expect FY26 growth to remain subdued. This reflects H1 headwinds, including order lumpiness arising from tariff-related uncertainty and continued pricing pressure. We anticipate volume-led improvement in H2, supported by new launches, such as Nystatin and Voclosporin, which should aid incremental growth. The company’s leadership in fermentation APIs positions it well to gain market share over time. However, given order spillovers from H1, we expect muted fullyear growth in FY26, even as tariff-related uncertainty is now behind us
Formulations Growth Delayed; Recovery Hinges on Injectable Scale-up
The formulations segment continues to face near-term headwinds, primarily due to tender deferment and delays in deriving meaningful contribution from the injectables segment. As a result, we now factor in slower growth in FY26. A more meaningful recovery is likely from FY27, although this remains contingent on the successful scale-up of the injectables portfolio. Given the subdued start, achieving the earlier guided 35–40% growth over the next three years appears increasingly challenging under the current trajectory.
Management Call – Highlights
API
* Growth driven by higher volumes in fermentation-based immunosuppressants and other niche products.
* Strong niche positioning in fermentation-based APIs across immunosuppressants, oncology, anti-infectives and antifungals.
* Stable pricing environment, with limited competition due to technological barriers and limited global suppliers.
* Broader pipeline spans anti-infective, antifungal and oncology segments, all complex/fermentation-based and niche, where competition is typically 2–4 global players.
Formulations
* Growth supported by product additions and deeper penetration in therapeutic segments linked to core APIs.
* Peak revenue potential is around INR 6 Bn from the Injectables facility.
* The management expects injectables to contribute ~6% to growth in the next 3–5 years.
CDMO Business
* One CDMO project linked to an NDA product has already been commercialised in the US; discussion under way to evaluate global expansion.
* The management highlighted increasing second-source and CDMO engagements, supported by improved global trade visibility and supply diversification trends.
* Other CDMO opportunities which were temporarily delayed due to tariff-related uncertainty have regained momentum after September 2025, with fresh RFQs emerging across enzymes and contract manufacturing assignments for innovator companies.
Outlook
* Deferred demand and spillover from previous disruption should unwind gradually, positioning Q4FY26 for a stronger quarter.
* FY26 below historical averages due to H1FY26 challenges.
* Two anti-infective launches planned in FY26, targeting niche positioning and low competition.
* Medium-term target: ~25% CAGR over 3–5 years, stepping up from the existing ~18% baseline.
* Annual capex of INR 1000–1500 Mn to support maintenance and growth projects.
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SEBI Registration no.: INZ 000160131
