Kwality Pharmaceuticals Limited

Healthcare — Drug Manufacturers - Specialty & Generic · NSE

₹3,425.90+₹110.00 (+3.32%)

DalalBaazaar Score

70 / 100

🟢 Good

Verdict

NEUTRAL

Risk

High

Driven by negative free cash flow, micro-cap size, which brings thin liquidity.

In simple words: Strong business and financial position, with both sales and profits growing well. Cash generation is currently the main factor to watch.

Decision support, not a buy or sell call.

As of 18 Oct 2026, 6:58 pm

Understanding the Business

Company site ↗

The 60-second version of Kwality Pharmaceuticals Limited — what it does, how it earns, and who it competes with, before any of the numbers below.

What does this company do?

Kwality Pharmaceuticals Limited, together with its subsidiary, manufactures finished pharmaceutical formulations in India and internationally.

IndustryDrug Manufacturers - Specialty & Generic

SectorHealthcare

Employees1,137

Annual revenue₹503 Cr

How does it make money?

Turns over ₹503 Cr a year. Of every ₹100 of sales, about ₹13 reaches shareholders as profit, with ₹24 left at the operating level before interest, tax and depreciation. Each of its 1,137 employees supports ₹44.2 lakh of revenue a year, the signature of a people-led business.

Revenue / employee₹44.2 lakh

Who are its competitors?

The closest listed comparisons in its industry are SUN PHARMACEUTICAL IND L, DR. REDDY S LABORATORIES, CIPLA LTD, DIVI S LABORATORIES LTD. These are the companies its valuation and returns are measured against elsewhere in this report.

Compared side by side in Peers ↓

What is its competitive advantage?Some evidence

ROCE of 27.4% is above what capital typically costs, which suggests some pricing power, though not yet the sustained, wide gap that marks a durable advantage.

Peer median ROE14.5%

What has been driving growth?

Sales and margins have both contributed to where profit is now. Over 3 years revenue moved +100% while net margin moved +73% relative to itself. What this cannot tell you is which products, customers or geographies did the work — that lives in the segment disclosures of the annual report.

Revenue effect+100%

Margin effect+73%

DalalBaazaar Score

70/ 100

Good

Weighted across six categories. Every point is explained below.

✗ P/E of 43.9x is demanding — it needs sustained high growth to justify
✗ P/B of 10.72x is a steep premium to book

Quality vs. Valuation

Company Quality

84/ 100

Excellent

How good the business is, ignoring the share price entirely.

Valuation

37/ 100

Expensive

What you are being asked to pay, ignoring how good the business is.

A good business, but the price already reflects that. The quality is real; the question is whether you are overpaying for it today.

Historical Valuation

Current P/E

43.9x

Sector Median

33.3x

median of 4 sector peers

⚠️Against its sector it trades 32% above the peer median of 33.3x.

vs. its own history

Not enough price and earnings history

vs. sector peers

Expensive

33.3x median of 4 peers · +32%

vs. generic bands

Expensive

Above 35x

EV/EBITDA

30.6x

PEG

0.85

What's Good / What's Bad

🟢 What's Going Well4

Return on equity is rising
ROE has improved from 9.7% to 20.3%.
Return on capital is rising
ROCE has improved from 13.9% to 27.4%.
High return on capital employed
ROCE of 27.4% is the mark of a business that converts capital into profit efficiently.
Consistently profitable
Profitable in every one of the last 4 reported years.

🔴 What Needs Attention0

Nothing stands out as clearly deteriorating on the years of data available.

Red Flags

4 items require attention · 2 high · 2 watch

🔴Profit up while operating cash flow fallsFinancial
Reported profit rose but cash generated by operations declined — worth checking whether earnings are being supported by non-cash items or working capital.
🔴Receivables growing faster than salesFinancial
Receivables up 291% against revenue up 100% — sales are being booked faster than they are collected.
🟡Debt is increasingFinancial
Total debt is up 45% over 3 years.
🟡Free cash flow is negativeFinancial
Free cash flow was -₹32 Cr in the latest year.

Investment Thesis

🟢 Bull CaseWhat could make this work?

Capital compounds at a high rate
ROCE of 27.4% means each rupee reinvested earns well above what capital costs. If the company can keep deploying at this rate, growth creates value rather than just consuming cash.
Earnings have proved durable
Profitable in every one of the last 4 reported years. Consistency lowers the risk that any single bad year is structural rather than cyclical.

🔴 Bear CaseWhat could go wrong?

Sales are being booked faster than collected
Receivables are up 291% against revenue up 100%. If customers keep taking longer to pay, reported profit will not turn into cash — and write-offs follow if some never do.
A premium to the sector to defend
It trades 32% above the peer median. That premium needs a reason that persists, or it closes.
Size brings its own risk
Micro Cap businesses are thinly traded, so exits are harder in a falling market and single events move the price more than they would for a larger company.
Several serious flags at once
2 high-severity checks triggered. Individually each has an explanation; together they raise the chance that something structural is wrong rather than a one-off.

🟡 Key Things to WatchMeasurable tripwires, set against where this company stands today

1Revenue growth stays above 20% a year✓ 26.1% CAGR
Latest reported year was 45.6%. The bar is set below the established compounding rate, so ordinary variation does not trip it.
2EBITDA margin holds above 22%✓ 23.9%
Two points below today's level — enough room for noise, tight enough to catch real compression.
3Free cash flow remains positive✗ -₹32 Cr
Profit that never becomes cash eventually stops being profit.
4Debt / EBITDA stays below 2x✓ 1.1x
The ratio lenders write covenants against; it survives a small or negative equity base, unlike Debt/Equity.
5ROCE stays above 24%✓ 27.4%
Falling returns on capital are usually competition arriving, and show up here before they reach the margin.

Investment Checklist

8 / 10 checks passed

✓ Strong return on equity (ROE ≥ 15%)
✓ Strong return on capital employed (ROCE ≥ 15%)
✓ Healthy net margin (≥ 10%)
✗ Generates positive free cash flow
✓ Manageable leverage (Debt/Equity < 1.0)
✓ Adequate short-term liquidity (Current Ratio ≥ 1.0)
✓ Revenue growing year-over-year
✓ Profit growing year-over-year
✗ Not trading at an extreme valuation (P/E < 40x)
✓ Not buying right at the 52-week high

Price history

Quick Metrics

6 good · 2 neutral · 3 weak

Market Cap

₹3,555 Cr

Micro Cap

Smaller company — thin liquidity and deep drawdowns are normal here

P/E (Trailing)

43.9x

Expensive

Expensive — verify against sector peers

P/B Ratio

10.72x

Rich

Steep premium to book — needs high, durable returns to justify

EPS (TTM)

₹78.1

Profitable

Profitable on a per-share basis

ROE

20.3%

Strong

Strong capital efficiency

ROCE

27.4%

Strong

Earns comfortably above its likely cost of capital

Debt/Equity

0.40x

Low

Conservative leverage

Revenue Growth (YoY)

45.6%

Healthy

Healthy top-line growth

Profit Growth (YoY)

114.9%

Healthy

Profits growing at a healthy clip

Dividend Yield

None

No dividend yield reported — usually means no payout, but verify if one was recently initiated

Free Cash Flow

-₹32 Cr

Cash burning

Spending more cash than the operations bring in

More Metrics

Operating Margin

22.6%

Good

Healthy core-business profitability

Net Margin

14.6%

Good

Strong bottom-line conversion

Current Ratio

1.80

Comfortable

Healthy short-term liquidity

Beta (vs Nifty)

0.82

Market-like

Moves roughly in line with the market

52W Range Position

36%

Mid-range

Technical Snapshot

RSI (14)

36.5

Neutral momentum

Financial Trend (4-Year)

Metric	FY23	FY24	FY25	FY26	3Y CAGR
Revenue	₹251 Cr	₹307 Cr	₹370 Cr	₹503 Cr	+26.1%
EBITDA	₹63 Cr	₹68 Cr	₹82 Cr	₹120 Cr	+24.1%
EBITDA Margin	25.1%	22.2%	22.2%	23.9%	—
PAT (Net Profit)	₹19 Cr	₹24 Cr	₹40 Cr	₹67 Cr	+51.5%
EPS	₹18.67	₹22.93	₹38.4	₹64.9	+51.5%
ROE	9.7%	10.6%	15.1%	20.3%	—
ROCE	13.9%	17.1%	23.0%	27.4%	—
Total Debt	₹90 Cr	₹98 Cr	₹112 Cr	₹131 Cr	+13.1%
Free Cash Flow	-₹6 Cr	₹13 Cr	₹28 Cr	-₹32 Cr	—

🟢 Revenue has grown at 26.1% a year over 3 years.

🟢 EBITDA has grown at 24.1% a year over 3 years.

🔴 EBITDA Margin has fallen from 25.1% to 23.9% over 3 years (-1.2 pts).

🟢 PAT (Net Profit) has grown at 51.5% a year over 3 years.

🟢 EPS has grown at 51.5% a year over 3 years.

🟢 ROE has risen from 9.7% to 20.3% over 3 years (+10.6 pts).

🟢 ROCE has risen from 13.9% to 27.4% over 3 years (+13.5 pts).

🔴 Total Debt has grown at 13.1% a year over 3 years.

Balance Sheet & Cash Flow — FY2026

Total Assets

₹592 Cr

Total Liabilities

₹262 Cr

Cash & Equivalents

₹1 Cr

Operating Cash Flow

₹17 Cr

Capex

-₹49 Cr

Shareholding (proxy)

Institutional Holding

0.0%

Insider Holding

77.5%

Peer Comparison

Company	P/E	ROE
SUN PHARMACEUTICAL IND L	34.9x	14.5%
DR. REDDY S LABORATORIES	31.0x	8.8%
CIPLA LTD	31.8x	9.8%
DIVI S LABORATORIES LTD	83.0x	17.5%

Recent News

2 mixed4 general

Kwality Pharmaceuticals Limited (KPL.NS) recent insider transactions

Yahoo Finance UK, 17 Oct

We Think That There Are Issues Underlying Kwality Pharmaceuticals' (NSE:KPL) Earnings

Simply Wall Street, 27 MayResults

🟡Mixed / dependsA results event. The figures on this page update once the new statements reach the data feed, which usually lags the announcement.

Kwality Pharmaceuticals (KPL.NS) Holds Above ₹3,600 With Modest 0.58% Gain - Market Profile

https://www.siam.in/, 30 Sept

Kwality Pharma Share Price Jumps Over 20% After Q1 Net Profit More Than Doubles

NDTV Profit, 10 AugPrice move

🟡Mixed / dependsA price move, which is not by itself a change in the business. Worth finding the cause before reading it as either good or bad.

KPL Stock Price and Chart — NSE:KPL

TradingView, 20 Apr

Kwality Pharma, Aarti Pharmalabs, Universal Cables hit 20% upper circuits

Business Standard, 10 Aug

Watch Items

Cross-check against the company's latest quarterly filing / investor presentation before acting.

DalalBaazaar Thesis

StrongBusiness Quality · Financial Health · Growth · Profitability

WeakValuation · Risk

Points for each in the Score ↑

Good business, demanding price

The quality is real and the price already reflects it. Buying here is a bet that the business keeps compounding for long enough to grow into the multiple — which good businesses often do, but it removes the margin for error that a lower price would have given you. 2 high-severity red flags sit above this conclusion and should be read first.

1 of 5 tripwires tripped — Free cash flow remains positive · see Key things to watch ↑