Shares of Sai Life Sciences Limited fell 13.47% to ₹962.60 on the NSE on May 15 — shedding ₹149.90 from a previous close of ₹1,112.50 — making it one of the top losers on the exchange despite reporting an 18% year-on-year rise in net profit for Q4FY26. The stock touched an intraday low of ₹960.00, with the day’s range spanning ₹960 to ₹1,064.80 against a 52-week range of ₹707 to ₹1,139.40.
The selloff is a function of three things landing simultaneously: a revenue miss against market estimates, a sharp sequential margin compression, and the structural reality of CDMO earnings lumpiness colliding with a valuation — 62.31x trailing P/E — that leaves no room for quarterly shortfalls.
What the numbers say
Revenue from operations for Q4FY26 came in at ₹602.14 crore, up 3.91% year on year from ₹579.51 crore and up 8.21% sequentially. Morgan Stanley flagged that the 4% year-on-year revenue rise to approximately ₹600 crore missed their estimates — a material distinction for a contract development and manufacturing organisation where quarterly revenue reflects milestone-linked project deliveries rather than steady consumer offtake. EBITDA rose 12.04% year on year to ₹176.55 crore, with EBITDA margin expanding to 29.32% from 27.19% a year ago. However, sequentially the margin contracted sharply — down 444 basis points from 33.76% in Q3FY26 — attributed by Morgan Stanley to product mix normalisation as higher-margin molecules delivered in Q3 gave way to a more standard Q4 mix. PAT rose 18.09% year on year to ₹104.24 crore from ₹88.27 crore.
The full-year picture tells a different story
The quarterly noise obscures a fundamentally stronger business. For FY26, Sai Life Sciences posted revenue of ₹2,192 crore, up 29% year on year, with full-year EBITDA margin at 28.8% — within management guidance of 28-30% and confirmed by Morgan Stanley as consistent with their model. Full-year PAT of ₹349 crore more than doubled, up 105% year on year, driven partly by a sharp reduction in finance costs from ₹762 crore to ₹392 crore following debt repayment from IPO proceeds — a ₹370 crore saving that flowed directly to the bottom line. Net cash stands at approximately ₹600 crore and interest coverage is at 19x, transforming the balance sheet from a liability into a structural advantage.
Capex of ₹590 crore in FY26 is expanding reactor capacity from 700 KL to 1,150 KL by end-FY27. Three commercial and four late-phase molecules were added to the pipeline during the year, with the oligonucleotide capability in validation — positioning the company for the next wave of CDMO demand in novel modalities.
What Morgan Stanley says
Morgan Stanley maintained its Overweight rating on Sai Life Sciences with a target price of ₹1,160 — a 20.5% upside from the current level of ₹962.60. The brokerage projects approximately 30% EBITDA margin for both FY27 and FY28, reflecting its view that FY26’s product mix volatility is transient and that operating leverage from front-loaded R&D and employee costs in FY24-25 will continue to manifest through the revenue ramp. The full-year FY26 EBITDA margin of 28.8% remaining within management guidance is the key data point Morgan Stanley anchors its constructive view on.
The market’s reaction on May 15 is a valuation correction to a quarterly miss rather than a structural reassessment of the business. At 62x earnings and in a lumpy CDMO model where quarterly revenue can swing materially based on molecule delivery timelines, even a moderate shortfall against expectations triggers a disproportionate price response. The annual trajectory — 29% revenue growth, PAT doubling, balance sheet now net cash, capacity expansion underway — remains intact.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Please consult a SEBI-registered financial advisor before making investment decisions.