Jubilant Life Sciences Ltd: Out-performer in Pharma Sector

Jubilant Life Sciences Ltd is a globally integrated Pharmaceutical and Life Sciences Company operating in manufacture and supply of Application Programming Interfaces (APIs), Radio pharmaceuticals,Solid Dosage Formulations, Allergy Therapy Products and Life Science Ingredients. In addition, it provides services in Contract Manufacturing of Sterile Injectables and Drug Discovery Solutions. It has opened up prospects in the Drug Discovery Solutions Segment by conducting collaborative and integrated programs. The strength of the Company lies in its unique Pharmaceuticals and Life Sciences products and services offered across the value chain.

Jubilant Life Sciences shares surged over 3% on Tuesday, 9th August, and showed strong profitability as it posted a 22.48% rise in consolidated net profit in its FY17 Q1 results on grounds of improved performance of specialty pharmaceuticals and reduction in expenses. Jubilant share price settled 3.61 per cent up at Rs 341.90. The stock opened at Rs 327.75 and reached a high and low of Rs 348.45 and Rs 327.75, respectively, in trade on the result day.

Key Highlights 

• The consolidated revenue stands at Rs.1420 crores with international revenues contributing 74% to the overall mix.
• PAT was reported at Rs.162 crores which is a 22% YoY rise.
• The total revenue has shown a QoQ decline in addition to a rise in expenditure. However, the operating profit has shown an increase which is justified by cost optimisation practices.
• EBITDA was Rs. 372 Crore, improving by 13% YoY with EBITDA margins at 26.2%, up from 22.7% in Q1’16.
• The EPS of the consolidated entity rose to 10.15 in comparison to 3.03 QoQ. However, this huge upshot can to attributed to the presence of an exceptional item in the previous quarter which deals with changes in the fair value of investments and profit on sale of investments.
• Capital expenditure was Rs.41 crores and net debt reduction was Rs.247 crores. The company further aims to reduce debt in the time to come.
• On a standalone basis, the profit after tax recovered from a negative Rs.7.47 crores to positive Rs.20.98 crores with an almost 50% reduction in taxes.

Segment Wise Review

Pharmaceuticals

• This segment reported revenues of Rs.752 crores, depicting a 7% YoY rise. Specialty Pharmaceuticals (Sterile Products) revenues rose 13% YoY, constituting 54% of total Pharmaceuticals segment sales.
• EBITDA growth was 13% YoY with a 34% margin, compared to 32.2% in Q1 FY16; aided by improvement in Specialty Pharmaceuticals (Sterile Products).
• It contributed 70% to the company’s EBITDA.
• There was an addition of one new client in the quarter in CMO of sterile injectibles with an order book of $534 million.

Life Science Ingredients

• Revenues in this segment have seen a 14% YoY decline while EBITDA margins have gone up from 17.2% in Q1 FY 16 to 19% in Q1 FY 17. This is attributed to its its cost optimization initiatives.
• Primary reasons behind the revenues decline are lower input prices due to lower crude prices consequently resulting in a decline in prices of finished products and emphasis on some profitable markets.

Drug Discovery Solutions

• Revenues grew 102% YoY, contributing 3% to total revenues.
• The EBITDA margin saw a drastic increase from -3.5% in Q1 FY16 to 32.2% in Q1 FY17.
• There have been strategic investments in the Drug Discovery ventures.

Prospects

Mr. Shyam S Bhartia, Chairman and Mr. Hari S Bhartia,  Co-Chairman & MD, Jubilant Life Sciences put forward their outlook by stating ‘We are glad to state that our company has built a robust long term sustainable business model with the growth engine of Pharmaceuticals and Drug Discovery Solutions segments. By creating focused management teams for all the three segments of businesses, we are able to clearly define strategic initiatives with the right mix of capital allocation. We believe that the company will continue to deliver better performance going forward given the robust product pipeline in place.’

The Board expects the company to retain momentum with its endeavors such as the new product launches in Generics, growth in ROW business, expected launches of its products such as Ruby-fill and other strategic initiatives for better capacity utilization.

With 11 world-class manufacturing facilities in India, US and Canada and a committed team of around 6500 multicultural people across the globe, the Company is dedicated to deliver value to customers spread across above 100 countries. The Company is recognized as a ‘Partner of Choice’ by leading pharmaceuticals and life sciences companies at a global level.

Investment Opinion

Jubilant is a good buy at 350 which is the previous day low with the target of 410 as it has come out with excellent numbers and is still trading at a low PE of 12.6.

Jubilant has shown huge delivery quantity of 11.46 lakhs share (20 day Average delivery position is for 3.5 lakhs share) on 10th august were share traded in a range of Rs. 352 as low to Rs. 378 as high  of that day. There for Rs. 352 can be considered as a good support area to buy a stock if market gives correction.