Growth tempo maintained; Focus on consistency…
About the company: Jubilant Pharmova (JPL) is an integrated, multi-dimensional pharmaceuticals company with global presence. The company was carved out from erstwhile Jubilant Life Sciences to focus on pharma business.
• The company operates through six segments- i) Radio pharmaceuticals and Radio pharmacies; ii) Sterile injectables (CDMO); iii) Allergy Immunotherapy; iv) CRDMO-APIs and Drug Discovery; v) Generics; and vi) proprietary novel drug business.
• It is the third largest radiopharmaceutical manufacturer with second largest commercial radio pharmacy network in the US. It is also the second largest player in US Subcutaneous Allergy Immunotherapy segment.
Result performance & Investment Rationale:
• Q3FY26 – Strong revenue momentum but margins under pressure- Revenues grew 16.7% YoY to ₹2116.1 crore driven by CDMO Sterile injectables (49% growth), Drug Discovery Services (13% growth) and Allergy Segment (13% growth). Other segments like Radiopharmaceuticals, Radio pharmacy and Generics also witnessed growth of 12%,11%, and 13% respectively. CDMO-API business de grew 9% on YoY basis. EBITDA remained flat ₹ 289 crore, as growth in topline was offset by margin dilution in Allergy segment due to lower production and CDMO (Sterile) due to facility shutdown for remediation. EBITDA margins stood at 13.6% (214 bps decline) whereas GPM stood ~66.3%.
• Guidance more or less maintained with consistency in earnings – CDMO Sterile injectables and Drug Discovery continued with the growth momentum’ Radiopharmaceuticals growth was also back on track due to traction from Ruby- Fill (Positron Emission Tomography (PET)radiopharmaceutical product used for Cardiac imaging) however management expects slowdown in coming two quarters due to temporary supply shortages. CDMO Sterile injectables growth was driven by Line 3 tech transfer programs besides resumption of production at Montreal post implementation of remediation measures. Drug Discovery Services growth scaled up due to large pharma contracts and management expects medium term outlook to be positive.
• The new investments include commissioning of the 4th CDMO line in Spokane, investing in six high margin PET Radiopharmacies in the US, new launches in Radiopharma, refurbishment of old Allergy Immunotherapy plant among others. We continue to focus on the flagship growth segments. Their performances are critical in order to achieve the management’s aspirational target for FY30- doubling of overall revenues (FY24 base), EBITDA margins range of 23-25% and RoCE in high teens.
Rating and Target price
• We value JPL on the SoTP basis and assign a target price of ₹ 1310. At the current level the stock offers better risk-reward outlook.
