Booster shot: A well-rounded strategy
Jubilant Pharmova (JPL) is undergoing a turnaround and adding new growth drivers, which provides long-term growth and earnings visibility. We argue JPL can expand its revenue/EBITDA at a CAGR of 11%/24% through: i) Ruby-Fill ramp-up; ii) turnaround of Radiopharmacy and generics business; iii) commissioning of Line-3 at Spokane; and iv) CRO growth. The real booster shot would be balance sheet improvement, lifting PAT 4x over FY24–27E.
Valuing JPL’s diversified—and unique—businesses using an SotP methodology yields a TP of INR1,450. Given growth/earnings visibility beyond FY27E and JPL’s sustained improvement, we recommend a BRAVEHEART ‘BUY’ with upside potential of ~30%.
Embracing diversified business model with new growth drivers
JPL operates a diversified business model with a mix of Radiopharma, allergy immunotherapy, CRDMO and commoditised business. We observe noncommoditised segments of its businesses have potent growth drivers such as launches, fresh capex coming on stream and industry tailwinds. The Radiopharma business is likely to benefit from Ruby-Fill ramp-up (~USD60mn in FY27E) and I-MIBG launch. Allergy business is likely to benefit from ex-US market growth while the CRDMO business shall benefit from industry normalisation and capex getting completed in FY27E. The Generics business would benefit from launches and reinstatement of compliance at the Roorkee facility. In a nutshell, JPL is now embarking on a new earnings cycle riding several growth factors.
Multiple triggers augur additional revenue potential of ~USD350mn
We reckon JPL has growth visibility of ~USD350mn beyond FY27E till FY30E through i) Ruby-Fill ramp-up (USD30–50mn additional revenue); ii) I-MIBG (~USD100mn); iii) establishment of six new PET pharmacies in FY28E (USD60mn revenue with 20% margins); and iv) full utilisation of CDMO Line-3 and 4 (USD160mn). Besides potential tailwinds in the wake of the BIOSECURE Act in the CRO business, product launches in generics may unlock further potential upside to revenue in our estimates.
PAT: 4x potential due to operational factors, financial turnaround
Given growth drivers in place, operating leverage and interest cost savings can catapult PAT growth by 4x over FY24–27E, indicating JPL might well be on the cusp of a new earnings cycle. Due to the improvement in the P&L and balance sheet, the company is set to generate cumulative FCF of ~INR19bn (FY25E–27E) leading to debt repayment while the RoCE would climb up from 6.5% in FY24 to ~14% in FY27E. We estimate its net debt/EBITDA shall improve from the current 3x to 1x in FY27E.
Unique business with long-term earnings visibility; initiate at ‘BUY’
We are initiating coverage on JPL at ‘BUY’ with an SotP-derived TP of INR1,450, implying upside potential of 30%, 14x EV/EBITDA and 30x P/E on FY27 estimates. Key risks: delay in I-MIBG launch/CMO/pharmacy capex, regulatory hurdles at Montreal/other units, inability to turn around the generics business.
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