Prabhudas Lilladher's research report on Jubilant Ingrevia
We believe JUBLINGR is well placed to capitalize on long term growth opportunities given (1) New value-added products pipeline (2) strong traction in CDMO (3) import substitution (4) China+1 strategy and (5) commensurate capex outlay of ~Rs23bn (earlier Rs20bn) over FY22-25. SPCM segment to lead earnings growth aided by highest capital allocation (Rs13bn). EBITDA contribution from higher value segments (SPCM + NHS) is expected to increase to ~66% by FY25E from ~53% in FY22, as SPCM/ NHS EBITDA grows at ~25%/7% CAGR, while concentration of its commodity vertical (Chemical Intermediates) reduces to 34% by FY25E. Reiterate ‘BUY’.
Outlook
We reduce our FY24/25E EBITDA estimate by 6%/4% and EPS estimate by 8%/5% to factor persisting weakness in Nutrition & Health solutions (NHS) segment along with lower margins in SPCM (due to transient non-availability of FSA coal); roll forward to FY25 and reiterate BUY at SoTP based TP of Rs900 (earlier 860). The strategy on alternate energy sources, however, is encouraging and will offset contracted coal impact over medium-long term.
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