Buy Jubilant Life Sciences; target of Rs 800: Motilal Oswal

Motilal Oswal's research report on Jubilant Life Sciences

Sales at INR23.8b (in-line) was up 6% YoY. Pharmaceutical sales were up 13% YoY at INR13.9b, while Life Science Ingredients (LSI) declined 6% YoY to INR9.1b, dragging overall growth. Change in product mix drags margins: Gross Margin (GM) stood at 59%, declining 120bp YoY/390bp QoQ, due to inferior product mix. A one-time charge of INR1b was recognized towards IPO expenses, penalties for non-supplies, litigation expenses and impact of higher cost inventory consumption in LSI. Adjusting for the same, EBITDA margin contracted ~100bp YoY to 19.3% (our est: 21.1%) due to higher raw material and employee cost as % of sales (21% vs 20% in 4QFY18).

Outlook

At CMP of INR595, JUBILANT trades at an attractive valuation of 6.3x FY20 EV/EBITDA and 5.7x FY21 EV/EBITDA. Maintain Buy.