Buy Jubilant Life Sciences; target of Rs 750: Dolat Capital
Dolat Capital’s research report on Jubilant Life Sciences
Jubilant Life Sciences’ (JUBL) Q4FY19 revenue grew marginally by 6% YoY as the growth in the pharma (59% of Q4FY19 revenue) and DDS (3%) segments was muted by a decline in the LSI (38%) segment. RubyFill continues to gain market share, but the company is currently incurring costs to develop the market for future revenue and higher margins. Triad to breakeven in FY21. LSI was impacted by a sharp drop in acetic acid prices (from USD 600 during 9MFY19 to USD 450 in Q4FY19), high inventory cost, and pricing pressure for molasses. JUBL guided that there will be product launches and capacity additions, which would be commercialised in Q1FY20, with a potential inflow of ` 3bn annually. We expect the pharma business to be stable as RubyFill is gaining market share. However, considering Roorkee WL, pressure on LSI, and a higher tax rate, we have a negative view for FY20 than our earlier assumption.
We expect the improving situation for Vitamin B3 and CMO’s additional capacities (starting a second line in H2FY20, commissioning Lyo in FY20) to provide aid to the company’s performance. Considering the recent correction in the market, we have a BUY rating, with a TP of ` 750 (10x FY21E EPS).
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