Buy Jubilant Life Sciences; target of Rs 845: ICICI Direct
ICICI Direct recommended buy rating on Jubilant Life Sciences with a target price of Rs 845 in its research report dated July 19, 2017.
July 20, 2017 / 04:36 PM IST
ICICI Direct's research report on Jubilant Life Sciences
Revenues grew 10% YoY to Rs 1596 crore (I-direct estimate: Rs 1644 crore). Revenues in pharmaceutical business grew 7% to Rs 859 crore (I-direct estimate: Rs 875 crore) while life science ingredients (LSI) revenues grew 20% to Rs 738 crore (I-direct estimate: Rs 742 crore) EBITDA margins declined 417 bps YoY to 21.2% (I-direct estimate: 21.7%), impacted mainly by a change in product mix. EBITDA declined 8% YoY to Rs 338 crore (I-direct estimate of Rs 356 crore) Adjusted net profit declined 9% to Rs 147 crore (I-direct estimate: Rs 165 crore) mainly due to a below expected operational performance.
Q1 revenues were more or less in line while net profit was below expectation due to higher taxation. Going forward, we expect margins to improve through FY19 on the back of the tilt of product mix towards margin accretive businesses, especially Radiopharma. For Radiopharma, we expect contribution to pharma revenues to improve from 25% in FY17 to 31% in FY19E. On the LSI business front, we expect product rationalisation to continue. With an improved visibility led by improvement in product approvals and a better segment mix we expect a continuous improvement in free cash flow generation and focus on debt repayment. We have ascribed a target price of Rs 845 (SOTP basis) based on 1) 14x FY19E EPS of Rs 59 and 2) Rs 17 pre share valuation of the acquired pharmacy business.
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