Buy Jubilant Life Sciences; target of Rs 850: ICICI Direct

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ICICI Direct's research report on Jubilant Life Sciences

Q2 results were almost in-line with I-direct estimates. Revenues grew 4.8% YoY to Rs 2375 crore. Pharma business grew 4.4% YoY to Rs 1516 crore led by growth in CMO and generics. Life science ingredients (LSI) revenues also grew 4.4% YoY to Rs 786 crore on good demand and improved pricing of select products. EBITDA margins stayed flattish (down 20 bps YoY) at 20.5% with lower other expenses being offset by lower gross margins. EBITDA grew 3.8% YoY to Rs 486 crore. PAT de-grew 10.2% to Rs 224 crore. Delta vis-a-vis EBITDA was due to lower other income and higher tax rate.

Outlook

As both these businesses have different fortunes, return profiles, we continue to value the company on SoTP basis till formal separation. Accordingly, we arrive at a target price of Rs 850.

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