The third quarter results mark a continuation of the company's struggles, with net sales declining to ₹544.55 crores from ₹676.23 crores in the year-ago period. The sequential performance showed a marginal 1.98% decline from Q2 FY26's ₹555.57 crores. More alarmingly, operating margins contracted sharply to 17.51% from 35.10% in Q3 FY25, whilst PAT margins compressed to just 5.33% from 22.70% a year earlier. The company, which rebranded from Suven Pharmaceuticals Limited in May 2025, is grappling with significant operational headwinds that have eroded profitability across all key metrics.
Quarterly Performance: A Troubling Trend
| Quarter | Revenue (₹ Cr) | Net Profit (₹ Cr) | Operating Margin | PAT Margin |
|---|---|---|---|---|
| Dec'25 (Q3) | 544.55 | 36.72 | 17.51% | 5.33% |
| Sep'25 (Q2) | 555.57 | 74.08 | 21.77% | 11.95% |
| Jun'25 (Q1) | 549.31 | 48.88 | 20.39% | 8.45% |
| Mar'25 (Q4) | 840.42 | 120.43 | 27.27% | 13.94% |
| Dec'24 (Q3) | 676.23 | 153.07 | 35.10% | 22.70% |
| Sep'24 (Q2) | 603.77 | 138.47 | 34.01% | 22.90% |
| Jun'24 (Q1) | 488.08 | 75.37 | 25.63% | 15.44% |
Financial Performance: Margin Erosion Accelerates
The financial performance in Q3 FY26 reveals a company under severe operational stress. Net sales of ₹544.55 crores represented the lowest quarterly revenue in recent periods, declining 19.47% year-on-year and 1.98% quarter-on-quarter. The revenue contraction was accompanied by a dramatic compression in operating profitability, with PBDIT (excluding other income) plummeting to ₹95.35 crores from ₹237.37 crores in Q3 FY25—a decline of 59.83%.
Operating margins tell a particularly concerning story. The operating margin (excluding other income) contracted to 17.51% in Q3 FY26 from 35.10% in the year-ago quarter, marking a deterioration of 1,759 basis points. The gross profit margin similarly compressed to 16.08% from 36.69%, whilst PAT margin collapsed to 5.33% from 22.70%. This represents one of the sharpest margin contractions in the company's recent history, suggesting fundamental challenges in cost management and pricing power.
Employee costs rose to ₹118.68 crores in Q3 FY26 from ₹111.32 crores in Q3 FY25, even as revenues declined, indicating operational deleveraging. Interest costs remained relatively stable at ₹9.11 crores, whilst depreciation increased to ₹46.94 crores from ₹43.56 crores, reflecting the company's ongoing capital investments. The tax rate for the quarter stood at 28.52%, higher than the 24.97% recorded in Q3 FY25.
Operational Challenges: Return Metrics Under Pressure
The company's return metrics have deteriorated significantly, reflecting the challenging operating environment. The latest half-yearly ROCE stood at 13.59%, down sharply from the historical average of 32.70%, marking the lowest level in recent periods. Similarly, the latest ROE of 9.08% compares unfavourably to the five-year average of 21.07%, indicating reduced capital efficiency and profitability.
The operating profit to interest coverage ratio declined to 10.47 times in Q3 FY26, the lowest in recent quarters, though still indicating adequate debt servicing capability. The company's balance sheet shows fixed assets of ₹1,499.00 crores as of March 2025, up substantially from ₹629.03 crores in March 2024, reflecting significant capital deployment. However, shareholder funds declined to ₹1,696.58 crores from ₹2,050.66 crores, primarily due to a reduction in reserves and surplus.
Critical Operational Concerns
Margin Collapse: Operating margins have fallen by 1,759 basis points year-on-year to 17.51%, whilst PAT margins compressed by 1,737 basis points to just 5.33%. This represents one of the sharpest profitability declines in the company's history.
Return Metrics: ROCE at 13.59% (half-yearly) is less than half the historical average of 32.70%, whilst ROE of 9.08% indicates significantly reduced capital efficiency.
Revenue Pressure: Q3 FY26 revenue of ₹544.55 crores represents the lowest quarterly sales in recent periods, declining 19.47% year-on-year.
CDMO Sector Dynamics: Pricing Pressures Intensify
Cohance Lifesciences operates in the highly competitive contract development and manufacturing operations (CDMO) segment, serving global life science and fine chemical majors. The company's struggles reflect broader challenges in the sector, including increased competition, pricing pressures from large pharmaceutical clients, and rising input costs. The sharp margin compression suggests that the company has been unable to pass through cost increases to customers, indicating limited pricing power in its contracts.
The pharmaceutical CDMO sector has experienced headwinds as global pharmaceutical companies optimise their supply chains and negotiate more aggressively on pricing. Companies like Cohance, which specialise in active pharmaceutical ingredients (APIs) and intermediates, face particular pressure as clients diversify their supplier base and seek cost efficiencies. The 19.47% year-on-year revenue decline in Q3 FY26 suggests potential loss of business volumes or contract renegotiations at lower prices.
The company's significant capital investments—with fixed assets nearly doubling to ₹1,499.00 crores in March 2025—were likely undertaken to expand capacity and capabilities. However, the sharp deterioration in profitability raises questions about the utilisation rates of these new assets and the return on invested capital. The mismatch between capacity expansion and revenue growth represents a critical challenge for management.
Peer Comparison: Valuation Premium Despite Underperformance
| Company | P/E (TTM) | P/BV | ROE (%) | Debt/Equity | Div Yield (%) |
|---|---|---|---|---|---|
| Cohance Life | 38.96 | 3.54 | 21.07 | 0.01 | — |
| Alembic Pharma | 23.38 | 2.92 | 11.80 | 0.25 | 1.39 |
| Natco Pharma | 9.78 | 1.74 | 16.25 | -0.34 | 0.60 |
| Jubilant Pharmo | 32.61 | 2.29 | 6.76 | 0.34 | 0.53 |
| Granules India | 25.55 | 3.48 | 15.81 | 0.30 | 0.26 |
Cohance Lifesciences trades at a P/E ratio of 38.96x, significantly higher than peers like Natco Pharma (9.78x), Alembic Pharma (23.38x), and Granules India (25.55x). This valuation premium appears unjustified given the deteriorating financial performance and margin compression. The company's historical ROE of 21.07% is superior to most peers, but the latest ROE of 9.08% suggests this advantage is eroding rapidly.
The price-to-book ratio of 3.54x is amongst the highest in the peer group, exceeded only marginally by Granules India at 3.48x. With minimal debt (debt-to-equity of 0.01), Cohance maintains a strong balance sheet, which provides some cushion during this challenging period. However, the absence of dividend payments (unlike most peers who offer yields between 0.26% and 1.39%) removes a potential support for the stock price.
Valuation Analysis: Premium Difficult to Justify
At the current price of ₹325.45, Cohance Lifesciences trades at elevated multiples that appear disconnected from its operational performance. The P/E ratio of 38.96x represents a significant premium to the pharmaceuticals and biotechnology sector average of 33x. The EV/EBITDA multiple of 23.18x and EV/Sales ratio of 5.97x similarly indicate expensive valuations, particularly concerning given the declining profitability trajectory.
The stock has experienced a dramatic decline from its 52-week high of ₹1,328.20, currently trading 75.50% below that peak. Whilst this might suggest value emergence, the deteriorating fundamentals—with profits down 76% year-on-year and margins compressing sharply—argue against a near-term recovery. The price-to-book ratio of 3.54x implies the market is still pricing in significant future growth and profitability improvement, which appears optimistic given current trends.
The proprietary Mojo Score of 30 out of 100 places Cohance in the "SELL" category, down from a "STRONG SELL" rating in January 2026. The valuation grade is classified as "FAIR" despite the elevated multiples, suggesting the scoring methodology considers the company's historical quality metrics. However, with a "NEGATIVE" financial trend and "BEARISH" technical outlook, the overall investment case remains weak.
Shareholding Pattern: Institutional Confidence Waning
| Category | Dec'25 | Sep'25 | Jun'25 | QoQ Change |
|---|---|---|---|---|
| Promoter | 57.49% | 57.49% | 66.41% | 0.00% |
| FII | 6.02% | 6.51% | 7.23% | -0.49% |
| Mutual Funds | 17.36% | 16.49% | 8.90% | +0.87% |
| Insurance | 3.94% | 3.95% | 2.27% | -0.01% |
| Other DII | 0.28% | 0.39% | 0.24% | -0.11% |
| Non-Institutional | 14.92% | 15.17% | 14.95% | -0.25% |
The shareholding pattern reveals mixed signals about institutional confidence. Promoter holding remained stable at 57.49% in Q3 FY26, though it had declined from 66.41% in June 2025. Foreign institutional investors (FIIs) reduced their stake by 49 basis points to 6.02% in the December quarter, continuing a downward trend from 11.05% in March 2025. This consistent reduction in FII holding suggests waning confidence amongst global investors in the company's prospects.
Mutual fund holdings showed a marginal increase of 87 basis points to 17.36% in Q3 FY26, though this remains well below the 13.04% held in March 2025. The significant jump from 8.90% in June 2025 to 16.49% in September 2025 and further to 17.36% in December 2025 indicates some domestic institutional managers are accumulating positions, potentially viewing current levels as attractive. However, insurance companies marginally reduced their stake, whilst other domestic institutional investors (DIIs) also trimmed holdings.
Total institutional holding stands at 27.59%, with 124 FIIs and 24 mutual funds holding positions. The data on promoter pledging is unavailable, though the significant promoter holding of 57.49% provides some stability to the shareholding structure. The decline in non-institutional holdings to 14.92% from 15.17% suggests retail investors are also reducing exposure.
Stock Performance: Severe Wealth Destruction
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | -4.11% | -0.87% | -3.24% |
| 1 Month | -27.36% | -0.92% | -26.44% |
| 3 Months | -48.30% | -1.92% | -46.38% |
| 6 Months | -66.99% | +2.88% | -69.87% |
| YTD | -38.42% | -2.77% | -35.65% |
| 1 Year | -70.59% | +8.82% | -79.41% |
| 2 Years | -50.38% | +15.79% | -66.17% |
| 3 Years | -33.02% | +37.11% | -70.13% |
Cohance Lifesciences has delivered catastrophic returns across all timeframes, significantly underperforming both the broader market and its sectoral peers. The stock has declined 70.59% over the past year, compared to the Sensex's gain of 8.82%, resulting in a negative alpha of 79.41 percentage points. The six-month return of -66.99% against the Sensex's gain of 2.88% highlights the severity of the underperformance.
The stock's volatility of 38.63% is more than three times the Sensex's volatility of 11.46%, with a beta of 1.35 indicating higher-than-market sensitivity to movements. The risk-adjusted return of -1.83 for the one-year period reflects extremely poor risk-reward characteristics. The stock currently trades just 1.96% above its 52-week low of ₹319.20, having fallen 75.50% from its 52-week high of ₹1,328.20.
The pharmaceuticals and biotechnology sector delivered a positive return of 5.02% over the past year, meaning Cohance underperformed its sector by 75.61 percentage points. This dramatic underperformance relative to both the market and sector peers reflects company-specific challenges rather than broader industry headwinds. The technical trend remains firmly "BEARISH," with the stock trading below all key moving averages—5-day (₹349.36), 20-day (₹375.06), 50-day (₹461.91), 100-day (₹614.70), and 200-day (₹810.33).
Investment Thesis: Quality Deteriorating Rapidly
The investment case for Cohance Lifesciences has weakened substantially over recent quarters. Whilst the company maintains a "GOOD" quality grade based on historical performance—including a five-year sales growth of 21.83%, minimal leverage (debt-to-equity of 0.01), and historically strong return metrics—the current financial trend is decidedly "NEGATIVE." All key operational metrics have deteriorated, with quarterly PAT down 61.2% versus the previous four-quarter average, ROCE at its lowest level, and operating margins compressed to multi-quarter lows.
The valuation, whilst classified as "FAIR" in absolute terms, appears expensive relative to the deteriorating fundamentals. A P/E ratio of 38.96x and EV/EBITDA of 23.18x are difficult to justify when profits are declining 76% year-on-year and margins are compressing dramatically. The technical outlook remains firmly bearish, with the stock in a sustained downtrend since late October 2025 and trading near 52-week lows.
Key Strengths & Risk Factors
KEY STRENGTHS ✓
- Strong Balance Sheet: Minimal debt with debt-to-equity ratio of just 0.01, providing financial flexibility
- Historical Quality: Five-year average ROCE of 32.70% and ROE of 21.07% demonstrate past operational excellence
- Institutional Participation: Total institutional holding of 27.59% with 124 FIIs and 24 mutual funds
- Capacity Expansion: Fixed assets nearly doubled to ₹1,499 crores, positioning for future growth
- Integrated CDMO: Serves leading global life science and fine chemical majors
- Long-term Growth: Five-year sales CAGR of 21.83% shows historical growth capability
- Cash Generation: Operating cash flow of ₹288 crores in FY25 demonstrates underlying cash generation
KEY CONCERNS ⚠
- Profit Collapse: Net profit down 76.01% year-on-year to ₹36.72 crores in Q3 FY26
- Margin Compression: Operating margin fell 1,759 bps to 17.51%; PAT margin down to just 5.33%
- Revenue Decline: Sales down 19.47% YoY to ₹544.55 crores, lowest in recent quarters
- Return Deterioration: Latest ROCE of 13.59% and ROE of 9.08% well below historical averages
- Expensive Valuation: P/E of 38.96x difficult to justify with deteriorating fundamentals
- Capacity Utilisation: Significant capex not translating to revenue growth, raising utilisation concerns
- Stock Performance: Down 70.59% in one year, trading near 52-week lows with bearish technicals
Outlook: Critical Monitoring Points
POSITIVE CATALYSTS
- Margin recovery through operational efficiencies and cost control measures
- Revenue stabilisation and return to growth trajectory in coming quarters
- Improved capacity utilisation of recently expanded manufacturing facilities
- New contract wins or expansion of existing client relationships
- Return metrics (ROCE/ROE) moving back towards historical averages
RED FLAGS
- Further deterioration in quarterly profitability or margins in Q4 FY26
- Continued revenue decline indicating loss of client business
- Operating margins remaining below 20% for multiple consecutive quarters
- Additional reduction in FII or mutual fund holdings signalling institutional exit
- Failure to generate positive operating leverage from capacity expansion
The outlook for Cohance Lifesciences remains challenging in the near term. The company must demonstrate its ability to stabilise revenues, improve capacity utilisation, and restore margins to historical levels. Management commentary on order books, client engagement, and pricing dynamics will be critical in assessing the potential for recovery. The Q4 FY26 results will be particularly important in determining whether the margin compression represents a temporary phase or a structural shift in the business model.
Investors should monitor several key indicators: quarterly revenue trends to assess demand stability, operating margin trajectory to gauge operational efficiency improvements, and return metrics (ROCE and ROE) to evaluate capital deployment effectiveness. The company's ability to translate its significant capital investments into revenue growth and profitability will determine whether the current valuation premium can be justified. Given the high volatility (38.63%) and bearish technical trend, risk-averse investors should exercise caution.
The Verdict: Avoid Until Stabilisation
Score: 30/100
For Fresh Investors: Avoid initiating positions at current levels. The 76% year-on-year profit decline, severe margin compression, and absence of near-term catalysts make the risk-reward unfavourable. Wait for at least two consecutive quarters of margin stabilisation and revenue growth before considering entry. The stock's high volatility and bearish technical trend add to the risk.
For Existing Holders: Consider reducing positions on any technical bounces towards the ₹375-400 range (20-day and 50-day moving averages). The deteriorating fundamentals, expensive valuation (P/E 38.96x despite profit decline), and negative financial trend suggest limited upside potential. Hold only if you have a long-term horizon (3+ years) and conviction in management's turnaround capabilities.
Fair Value Estimate: ₹280-300 (14% downside from current levels), based on normalised earnings potential and peer valuations. Current price of ₹325.45 does not adequately reflect the operational challenges and margin pressures.
Note— ROCE = (EBIT - Other income)/(Capital Employed - Cash - Current Investments)
⚠️ Investment Disclaimer
This article is for educational and informational purposes only and should not be construed as financial advice. Investors should conduct their own due diligence, consider their risk tolerance and investment objectives, and consult with a qualified financial advisor before making any investment decisions. Past performance is not indicative of future results. The views expressed are based on publicly available information and analysis as of February 13, 2026.
