Sell Jubilant Life Sciences; target of Rs 446: Prabhudas Lilladher

Prabhudas Lilladher's research report on Jubilant Life Sciences

We reduce earnings estimate of JUBILANT by 23%17.5%11.6% for FY21/22/23E due to weak and inconsistent performance of its Pharmaceutical segment (65% revenue and 78% EBITDA contribution in FY20) whose key contributors Radio pharma and Allergy are currently witnessing lower volumes caused by pandemic in US. Radiopharma being a hospital driven business, we expect lower turnout/visit of non-Covid patients in US hospitals leading to slower ramp up in volumes and revenues for JUBILANT. With travel restriction still in place for USFDA’s visit on overseas plants, expect no new approvals for its key plants (Roorkee, Nanjangud) which are currently under WL/OAI. This will impact revenues in generics and API under pharma segment.

Outlook

We increase our TP to Rs446 (from Rs414) as we increase our EV/EBITDA multiple assigned to pharma segment to 5x (4x earlier) on account of better debt management since Q4FY20 and parity over the valuation of peers. Nevertheless, the challenging valuation of JUBILANT (vs. our TP) implies strong downside. We maintain ‘SELL’