Daljeet Singh Kohli, Head of Reresearch at India Nivesh Securites recommends buying Jubilant Life Sciences with a target of Rs 492.
Daljeet Singh Kohli, Head of Reresearch at India Nivesh Securites told CNBC-TV18, "We had a buy on Jubilant Life Sciences right from six months ago, Rs 250 onwards. Jubilant Life has two businesses, 50 percent comes from pharmaceutical and 50 percent from chemicals. The pharmaceutical business has CMO, which is radiopharmaceutical business and generic business."
"The CMO business was under a bit of pressure because of the two facilities coming under USFDA problems. In last one and a half to two years they have come out of those problems and now the Montreal facility is totally out and Spokane is ramping up very well. It means 50 percent of the business is doing well."
"The remaining chemical business is stable, it will not deteriorating. We have taken price increases of around 10 percent, two-three times. So net impact is that all across, everything is moving in unison. The company is doing well and if we talk of valuation then currently it is at Rs 440 and trading at 8 times EV to EBITDA. The caveat here is that the company has a very high debt, Rs 4,300-4,500 crore kind of debt which is not the usual thing for a pharmaceutical company," he said.
"It is trading at 8 times of EV to EBITDA. Their Roorkey facility which is the generics business is doing very well. Yesterday they got an approval for one of the drugs, which is anti-depressant and that is again USD 100 million kind of drug and there are 32 pending approvals. So the kind of approvals that are coming will keep good momentum in this stock in next one to one and a half years. Regulatory risk is relatively lesser as compared to others and valuationwise also it is okay," he added.
"The company wants to do a QIP of USD 200 million, which will be around 18 percent delusion but if all that money goes into debt reduction then the major negative which is there which is high debt will also taken care of. So we have currently given a buy rating with a target of Rs 492."The Great Diwali Discount!
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First Published on Dec 2, 2015 03:10 pm