Accumulate Jubilant Life Sciences; target of Rs 752: Prabhudas Lilladher

Prabhudas Lilladher's research report on Jubilant Life Sciences

We upgrade our rating to Accumulate (earlier ‘SELL) as we increase our EV/EBITDA (FY22E) multiple assigned to pharmaceutical segment and bring in line with peers on better earnings outlook led by opportunities in Remdesivir API and formulations. We also increase our earnings estimate by 4% for FY21/22E after anticipating Remdesivir’s capability to compensate the Radio pharma loss, which is currently facing pricing pressures and lowering volumes. Given the rise in COVID cases globally we believe JUBILANT will benefit as it is the only Indian player to supply Remdesivir API to innovator(Gilead). JUBILANT has also been successful in reducing net debt by Rs7bn in last 18 months and current net debt as of 1HFY21 stood at Rs32.5bn.

Outlook

With estimated EBITDA of Rs15bn/Rs4.21bn for pharma and LSI in FY22E, we assign EV/EBITDA multiple of 8x (earlier 5x) for pharma segment and 3x (Unchanged) for LSI and arrive at new TP of Rs752 (earlier Rs455) based on SOTP valuation. Our new rating is Accumulate (earlier Sell).