Prabhudas Lilladher's research report on Jubilant Life Sciences
JUBILANT Q4FY20 earnings were higher than our estimate due to higher stockup in US generics, lower erosion in core portfolio and favourable forex. We assumed COVID impact to be realised in Q4FY20, but better availability of inventory and raw materials led to upbeat in EBITDA and EBITDA margin. We believe although Q4FY20 performance was better, COVID impact may drag Q1FY21E marginally due to 1) Non-operational (2 months) Nanjangud Plant 2) muted performance of drug discovery (due to COVID-led disruption in global clinical trials) and 3) lower dispatch of API. This will be offset by favourable forex and better utilisation of operating leverage thereby resulting in normalised adj. EBITDA margin of 19-20%.
Outlook
Due to better operating leverage and increase revenue from Drug discovery segment we increase our earnings estimate by 36% for FY21E and 26% for FY22E and derive our new TP of Rs414 (from Rs363) based on SOTP valuation. We maintained 4x (EV/EBITDA) of pharma business and 3x (EV/EBITDA) of commoditized LSI business. However strong appreciation of USD, JUBILANT's net debt/ equity ratio of 1.6x continues to be an overhang in its valuation and we maintain Hold.
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