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Innova Captab delivered mixed results in 1QFY26, with revenue growing 20% YoY (3% above expectations), while the EBITDA margin came in at 14.8% (up 49 bps YoY and in-line with estimates). Reported PAT stood at Rs 310mn, up 5.2% YoY, impacted by higher depreciation costs following the commercialisation of the Jammu plant done during the last quarter. During the quarter, the Branded Gx segment increased 59% YoY on back of broader geographic reach and increased penetration in the domestic market. The CDMO segment grew 8% YoY, contributing to 71% of top-line. The tepid growth was on account of sales transfer from project transitions from Baddi to Jammu. We expect this segment’s growth to revive by 2Q-3Q FY26 as the Jammu plant utilization ramps up to 15%+. This will also aid margin improvement overtime. As the company now expands its presence in injectable and liquid formulation, it will support the delivery of 29%/33%/34% revenue/EBITDA/PAT CAGR over FY25–28—the highest among domestic CDMO peers. At the current market price, the stock is trading at 21x times FY27 EPS, which we find attractive given the superior growth visibility versus peers. We maintain a BUY rating with a target price of Rs 1,152

* Jammu facility ramp-up: The Jammu facility is scaling up in-line with our expectations with 1Q revenue at INR 600mn and INR 10mn EBITDA loss (including Baddi transfer). Current utilization per quarter is 4-5% of its INR 15bn capacity. The FY26 revenue guidance was maintained at INR 4bn based on expectation of API pricing to revive. The facility is expected to become EBITDA neutral at INR600mn–650mn, possibly in 2Q and PAT/tax neutral at INR 1bn quarterly revenue by end of FY26. Client plant visits, audits, and an incentive pass-through pricing model are being used to drive order inflow and wallet share from existing customers.

* Pricing pressures visible: The company is impacted by price erosion, especially in antibiotics like Amoxicillin, Potassium Clavulanate, and Cephalosporins, with some API prices down over 20%. Despite this, the company aims to bridge the annual INR1.6bn gap in guidance and reach INR1bn on quarterly business from Jammu. Expansion is expected to help partially normalize pricing.

* Exports and CDMO focus: Exports performed well, led by RoW markets, boosting the BGx segment. The company is registering its plants in RoW markets to expand its customer base. Of the 3,700-product portfolio, 71% revenue comes from the CDMO segment. The Baddi plant’s cephalosporin capacity will be fully redirected towards export-oriented business.

* Business reorganization: From 1QFY26 onwards, the company has reorganized its operations into two verticals—CDMO and Branded Generics—to align with strategic goals. This structure aims to optimize focus on global client partnerships in CDMO and expand its direct market presence in BGx both domestically and internationally.

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