Improving visibility expected to bring steadiness…
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.
Investment Rationale
• Essential wherewithal in place for a sustained growth in Radiopharma – JPL is well poised to ride on the niche pharma stream of Radiopharma (comprising of Radiopharmaceuticals and Radiopharmacies) with an established set up. Radiopharmaceuticals manufacturing is highly regulated and complex, which leads to limited competition, high customer stickiness and low-price erosions. JPL ticks most of the boxes in terms of capabilities and capacities with a wide range of product portfolio, efficient cost structure, robust supply chain management with an on-shore manufacturing facility in Montreal. JPL also has an added advantage of in house front-end in the form of Radiopharmacies. We expect JPL’s Radiopharmaceuticals segment to register a CAGR of ~12% during FY24-27E with EBITDA margin range of 45- 50%. Similarly, we expect Radiopharmacy segment to register a CAGR of ~13% for FY24-FY27 with margin profile of 2-3%.
• Other segments are in better shape for growth- Besides Radiopharma, segments such as Allergy Immunotherapy (pedigree and lower competition), CDMO of sterile injectables (improving orderbook and capex) and Drug Discovery services (improving global macros and client stickiness) are also expected to do better. Legacy segments such as APIs and generics are expected to crawl back to normal after a prolonged hiatus impacted by plant related issues and global slowdown.
• Balance sheet stress to wane with performance improvement: Financial performances were subdued during FY21-24 on account of Covid induced volatility and other aspects which led to debt /EBITDA reaching at alarming level of 4.1x. Things are likely to improve from FY25 onwards as we expect EBITDA improvement and significant debt repayment resulting into FY27E debt /EBITDA of 1.4x.
Rating and Target Price
• As most of the business segments poised for performance stability and growth, the future bodes well for the company especially for scenario FY27 and beyond. We believe the risk-reward matrix is favourable at the current level. We value JPL on the SoTP basis and assign a target price of ₹ 1420.
Leave a Reply