Reduce Cohance Lifesciences: target of Rs 640: ICICI Securities

ICICI Securities's research report on Cohance Lifesciences

Cohance’s Q2FY26 performance was in line with our expectations, though the cut in FY26 guidance was disappointing. While pharma CDMO growth continues to be impacted by inventory destocking for two products, dip in sales of NJ Bio and API+ (-4% YoY) division was a surprise. New order wins from innovator for large commercial products and surge in phase 3 projects are critical for a turnaround, though the current pipeline visibility is low. Management has cut FY26 revenue and margin guidance to flattish growth (earlier double-digit growth) and margin at 27-29% (earlier 30-32%). We cut FY26/27E earnings by ~37–41% to factor in lower-than-anticipated growth in pharma CDMO and NJ Bio. Downgrade to REDUCE with DCF-based revised target price of INR 640.

Outlook

We cut FY26/27E earnings by ~37–41% to factor in slower growth and lower margins. We now expect Cohance to register 11.3%/12.2%/7.8% revenue/EBITDA/PAT growth over FY25–28E. At CMP, the stock trades at 57.5x FY27E and 39.2x FY28E earnings. We downgrade to REDUCE (earlier Buy) with DCF-based lower TP of INR 640 (INR 1,250 earlier).