Buy Onesource Specialty Pharma Ltd For Target Rs. 2,621 By JM Financial Services Ltd
MSAs led growth, guidance remain intact
OneSource reported a moderate set of numbers in 2Q, with revenue/EBITDA growing 13%/38% and reported PAT was positive at INR 105mn, vs a loss of INR 421mn in 2QFY25. The top-line was a beat of 4% with expectations, driven primarily by execution of MSAs. EBITDA margins expanded to 28% (+520bps YoY), primarily due to expansion in gross margins by 689bps YoY. The management has guided that the growth for FY26 will be loaded in 2HFY26, as the DDCs capacity utilization ramp-up with opening of Semaglutide markets. OneSource’s clientele targeting GLP-1 first wave have increased their forecasts, leading to OneSource bringing forward its capacity expansion by a year ahead – targeting operationalization by CY26 end. In our understanding, OneSource is well positioned to capitalize on the upcoming GLP-1 patent expiry wave and as such we have built in an organic growth of 40%/52% CAGR in revenue/EBITDA over FY25-28 for the company. We maintain our BUY rating, continuing to value the company at 22x the Sep’27 EBITDA to arrive at a TP of INR 2,621.
* Base business expanding with 4x increase in pipeline vs FY25: The biologics business has seen a 4x increase in its funnel compared to FY25, which now includes novel modalities, earlyphase biologics, and biosimilars. The company signed nine new MSAs and licensing agreements during the period, with the number of customers common across multiple modalities rising to twelve. There are over fifty active RFPs across modalities, while nine NCE-1 and NBE programs continue to progress on track. The soft gel segment is entering its strong seasonal period with sustained demand. In injectables, organic expansion is underway, supported by acquisitions that are helping to strengthen the global footprint.
* DCC business fully sold out, new capacity from phase 2 expansions: The company has expanded its device portfolio by adding autoinjectors, dial, and push variable dose pen injectors during the 2Q, taking the total number of device platforms to 11. The DDC business remains fully sold out, leading to an acceleration of Phase 2 capacity expansion to meet demand from upcoming launches. The expansion is progressing ahead of schedule and is expected to be completed by end-CY26, almost a year earlier than planned. This capacity will support commercial supplies expected in FY27, when around 8–10 DDC customers are likely to launch across multiple geographies. In preparation for these launches, there has been an inventory build-up in working capital, largely supported by customer advances or purchase orders. Meanwhile, business momentum continues across key markets such as Canada, Brazil, MENA, and India.
* GLP-1- expanding fill finish capacity by 5x: The company has over 20 customers, with 8–9 preparing to launch products across multiple markets. Onesource has received take-or-pay and capacity reservation fees from 8–9 GLP-1 customers, providing revenue visibility in the near term. The GLP-1 category represents a large global opportunity with an estimated 1.5–2 billion potential patients. Management expects a deliverable capacity of 15–20 million units to translate into meaningful revenue once shipments begin next year. To address growing demand, the company is expanding its fill-finish capacity fivefold through phased additions up to CY26. Device assembly and packaging operations are fully integrated, enabling 100% of GLP-1 customers to receive finished, serialized products directly from Onesource sites. The strong performance of innovators such as Novo and Lilly has further increased awareness and demand in this segment, indirectly supporting Onesource’s generic partners.
* Canada market dynamics: The company highlighted that there are two waves of filers for the Canadian market, with three to four expected in the first wave. Dr. Reddy’s has been confirmed as one of Onesource’s customers for Canada and other markets. However, regulatory delays in Canada may cause a slight postponement of launch timelines for Dr. Reddy’s and possibly other filers. While these delays are expected to affect near-term revenue recognition, they do not impact ongoing operational activity. Management described the next two quarters as a period of ambiguity but reiterated that the business is not dependent on any single customer or market event. Onesource remains fully sold out on DDC capacity, though the Canadian delays have temporarily affected shipments and invoicing. Launches in other countries such as India, Brazil, and Turkey are progressing as planned, with no significant impact from the Canadian situation. Nine customers are preparing to launch in non-Canadian markets, with market openings expected from March onward. Approvals in these geographies are anticipated to follow shortly after Canada, improving visibility on shipments and revenue recognition from April onward.
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SEBI Registration Number is INM000010361
