OneSource retains $400 million FY28 target despite Line 3 delay

OneSource Specialty Pharma Limited retained its $400 million revenue target for FY28 even though management said its third bespoke cartridge line may commercialise only at the start of FY28. The company reported more than Rs 500 crore of revenue in the quarter ended September 30, 2026, while expecting all three cartridge lines to be available during FY28.

Why could OneSource’s third cartridge line be delayed?

OneSource said the third cartridge line could begin commercialisation at the start of FY28 rather than in the fourth quarter of FY27. The line has completed factory acceptance testing in Germany and has arrived at the company’s site, where it is ready for qualification. Management attributed the later arrival to extended transit times associated with events in the Gulf.

The timing is not fixed because the line is bespoke and requires rigorous qualification involving multiple European vendors. Management said it was making every effort to begin the line in the fourth quarter of FY27, but distinguished a potential operational start from commercialisation. It cited the second line’s implementation as evidence that qualification of larger-batch equipment can take longer.

The second cartridge line’s start was affected by geopolitical disruption for almost six months, according to management. It has nevertheless been running commercial batches since September 2026. OneSource said the second line immediately doubled total sterile production days, while the third line is intended to add further capacity once qualification is complete.

Does the Line 3 timing change OneSource’s FY28 target?

No, OneSource reaffirmed its FY28 outlook of $400 million in revenue and $160 million in earnings before interest, tax, depreciation and amortisation, or EBITDA. Management said the basis for retaining the outlook is that all three cartridge lines are expected to be available in FY28, even if the third line does not contribute for a full fourth quarter of FY27.

Management did not provide a quarterly revenue bridge, a fourth-quarter FY27 revenue target or an FY27 exit-rate forecast. When an analyst asked whether a fourth-quarter run rate could put the company within reach of the FY28 target, management repeated that the relevant factor was having all three lines available in FY28. It said the period for which Line 3 might be available in the fourth quarter remains uncertain.

OneSource also linked the target to the integrated scope of its cartridge operations. Management said each line is supported under one roof by cartridge filling, assembly, labelling, packaging and cold-chain capabilities. The call did not disclose revenue, production days or utilisation separately for each cartridge line.

What did OneSource report for the September 2026 quarter?

OneSource reported revenue of more than Rs 500 crore in the quarter ended September 30, 2026, up 37% year on year and 15% sequentially. EBITDA increased 53% year on year and 32% sequentially, while the EBITDA margin expanded by more than 400 basis points quarter on quarter to 32%.

The September quarter was OneSource’s third consecutive quarter of sequential growth, management said. For the first half of FY27, EBITDA rose 47% year on year. Management attributed the quarterly performance partly to additional drug-device combination, or DDC, capacity that came online during the quarter and generated commercial as well as master service agreement revenue.

EBITDA growth exceeded revenue growth in the September quarter, with 53% year-on-year EBITDA growth compared with 37% revenue growth. Management said this reflected operating leverage in its business model. The transcript did not disclose absolute EBITDA, segment revenue or the precise revenue contribution from the newly available DDC capacity.

How are OneSource’s other capacity projects progressing?

OneSource said its second cartridge line can run 500-litre batches and that its new lines can handle 500 litres or larger batch sizes. An analyst referred to 200-litre existing capacity in a question, but management did not specify the batch size of older lines. Management said demand from existing customers, existing markets and new markets should allow relatively quick ramp-up of the new cartridge capacity.

In softgels, OneSource said it had increased capacity almost threefold since additions began last year and had visibility for more than 80% capacity utilisation. Management said the current softgel site cannot be expanded further, prompting a planned greenfield facility. The proposed site is intended to add capacity and allow containment and high-potency softgels, although no construction timetable or investment amount was disclosed.

OneSource’s injectable-site shutdown began at the back end of the September 2026 quarter and is expected to continue through the current quarter. Management said the upgraded lines should be available from January, adding lyophilisation capacity and capability. It said injectables represent 70% to 75% of items on the United States Food and Drug Administration shortage list, with lyophilisation a significant contributor.

What demand and execution milestones could affect OneSource next?

OneSource expects the second half of FY27 to be stronger than the first, supported by new launches and higher commercial volumes from the second cartridge line. Its partner Hikma launched what management described as the first generic semaglutide in Saudi Arabia during the September quarter. Management also said active pharmaceutical ingredient supply for Dr. Reddy’s had commenced.

Management expects Dr. Reddy’s supplies to begin in Canada during the current quarter, followed by markets where approvals already exist. It said approvals in further markets are expected over the next two quarters. Those developments could affect demand for OneSource’s cartridge operations, but the call did not quantify expected volumes or revenue from either customer.

Biologics remains part of management’s growth case beyond FY28. OneSource said it won two end-to-end development-to-commercialisation projects from a United States biotech and an additional programme from an existing global animal-health customer in the September quarter. Management described its biologics request-for-proposal funnel as its highest ever, but gave no value, conversion rate or timing for the pipeline.

Conclusion

OneSource has retained its FY28 targets of $400 million in revenue and $160 million in EBITDA despite the possibility that Line 3 commercialisation will shift to the beginning of FY28. The reported September-quarter revenue of more than Rs 500 crore, 37% year-on-year revenue growth and 32% EBITDA margin provide the operating context, while the second line has been commercial since September 2026 and doubled sterile production days.

The next disclosed milestones are Line 3 qualification and any fourth-quarter FY27 start, the January availability of upgraded injectable lines, and the stronger second-half FY27 commercial-volume ramp management expects. Investors can also watch the planned Canadian supplies for Dr. Reddy’s in the current quarter, additional approvals over the next two quarters, and progress on the proposed greenfield softgel facility.