Partner With Us NRI
Jubilant Pharmova Ltd>
  • CMP : 461.4 Chg : 8.30 (1.83%)
  • Target : 340.0 (5.56%)
  • Target Period : 12-18 Month

03 Aug 2022

Headwinds persist; margin pressure amid generics impasse…

About The Stock

Jubilant Pharmova is engaged in specialty pharmaceuticals, CDMO, generics, drug discovery and proprietary novel drug businesses.

  • In specialty pharmaceuticals, it is the third largest radiopharmaceutical manufacturer with second largest commercial radio pharmacy network in US. It is the second biggest player in the allergenic extract market in the US
  • In CDMO (CMO, APIs) Jubilant is engaged in CMO of sterile injectables, ophthalmics, otics and ointments, creams and liquids
  • Revenue break up (FY22)- Generics - 19%, Specialty Pharma –43%, CDMO Sterile Injectable – 21% and CRDMO (CDMO-API + Drug Discovery) – 17%

Traction in specialty pharmaceuticals and CRDMO was offset by muted numbers in CDMO sterile injectables and generics

  • Revenues were down 11% YoY to ₹ 1452 crore
  • EBITDA was at ₹ 192 crore, down 49% YoY with margins at 13.3%
  • Adjusted PAT was at ₹ 47 crore (down 71% YoY)
What should Investors do?

Jubilant’s share price has de-grown by ~0.8x in the past three years (from ~₹ 439 in August 2019 to ~₹ 360 in August 2022) even after considering demerger of life science ingredients business into Jubilant Ingrevia.

  • Downgraded from HOLD to REDUCE due to 1) negative operating leverage in generics amid regulatory overhang, 2) slower-than-expected ramp-up in Radiopharma, and 3) lack of ex-Covid growth levers in CDMO
Target Price Valuation

Valued at ₹ 360 i.e. 13x FY24E EPS of ₹ 26.1

Key Triggers for future price performance
  • Expansion of capacity for sterile fill & finish at Spokane by 100% and new filler & lyo line at Montreal
  • Increase in CDMO order-book visibility amid loss of Covid opportunities
  • Ramp up in Ruby fill installations, embarking on executing turnaround plan in radio pharmacies with a target to achieve mid to high single digit EBITDA
  • Expansion into non-US markets and resolving regulatory concerns over Roorkee and Nanjangud facility
Alternate Stock Ideas

Apart from Jubilant, in CRAMs space we like Divi’s.

  • Quintessential play on Indian API/CRAMs segment
  • BUY with a target price of ₹ 4655

Key Financial Summary

Particulars FY19 FY20 FY21 FY22 5 Year CAGR(FY17-FY22) FY23E FY24E 2 Year CAGR (FY22-FY24E)
Revenues 9,110.8 5,975.8 6,098.5 6,130.2 0.4 5,870.9 6,392.8 2.1
EBITDA 1,739.0 1,548.0 1,396.5 1,156.3 -3.0 922.3 1,182.9 1.1
EBITDA Margins (%) 19.1 25.9 22.9 18.9 - 15.7 18.5 -
Adjusted Net Profit 854.7 710.7 595.3 413.9 -6.4 253.0 416.2 0.3
Reported EPS (|) 36.9 42.6 36.0 26.0 - 15.9 26.1 -
Adjusted EPS (|) 54.9 44.6 37.4 26.0 - 15.9 26.1 -
PE (x) 11.0 9.5 11.2 15.6 - 22.7 13.8 -
Target P/E (Diluted) 11.1 9.6 11.4 15.8 - 21.4 13.0 -
EV/EBITDA (x) 5.6 6.4 6.2 7.5 - 8.7 6.6 -
Price to book (x) 1.3 1.2 1.4 1.2 - 1.0 1.0 -
RoE (%) 17.8 12.7 12.6 7.8 - 4.6 7.0 -
RoCE (%) 14.3 11.7 13.7 9.0 - 6.1 8.6 -
Source: Company, ICICI Direct Research

Key takeaways of recent quarter & conference call highlights

  • Jubilant Pharmova’s revenues were at | 1452 crore, down 11% YoY. Generics declined 59% YoY to | 178 crore due to 1) lower volumes due to import alert at Roorkee plant, 2) pricing pressure in the US market and 3) lower Remdesivir sales. CDMO segment declined 29% YoY to | 263 crore on high base of Covid sales in Q1FY22. CRDMO (API + Drug Discovery) grew 45% YoY to | 280 crore as Drug Discovery Services revenue increased amid higher demand from Biotech companies for integrated services, functional chemistry and DMPK while APIs revenue grew YoY due to higher volumes. Specialty Pharma grew 14% YoY to | 722 crore driven by Radiopharmaceuticals which recovered from easing of Covid-19 pandemic and Radio pharmacies business witnessed growth due to higher volumes led by recovery from Covid-19 and new products. Allergy immunotherapy continues to operate at volumes higher than pre-Covid levels. EBITDA margins declined 970 bps YoY to 13.3% mainly due to lower profitability in generics and radio-pharmacies segment. EBITDA de-grew 49% YoY to | 192 crore while adjusted PAT declined 71% to | 47 crore
  • Jubilant Pharmova’s revenue growth in Specialty Pharmaceuticals and CRDMO was offset by CDMO Sterile Injectables and Generics. On the generics front, USFDA audited the Roorkee facility (under import alert) and has issued six observations. Generics along with CMO (sterile injectable + APIs) remain challenging on growth front amid high Covid base and compliance issues at manufacturing facilities. In radio-pharmaceutical, ruby-fill installations are on track while the management is working on turnaround plan for radio-pharmacies to reach EBITDA breakeven by FY24. Multiple issues are affecting several business segments and in absence of imminent key triggers, we expect the near to medium term overhang to remain on both revenue growth and profitability

Q1FY23 earnings conference call highlights

  • Jubilant will continue to ramp-up Ruby-Fill installations in radio-pharma business. Radiopharmacy business witnessed growth due to higher volumes as the management indicated at new product launches while turnaround plan is likely to post EBITDA breakeven by FY24
  • In allergy immunotherapy, the management looking to ramp up in the US and expand in non-US markets as well
  • In the CMO business, the management is working to undertake capacity expansion at Spokane, by 100% (one line will be commercialised by FY25 while another by FY27). Another line extension at Montreal facility will come on-stream by FY27. In guidance terms, FY23 revenues is likely to be at pre-Covid levels while growth is likely to come post new capacities
  • In Generics business, the management is looking to resolve USFDA import alert for Roorkee facility. Jubilant is likely to mitigate some risk in generics by increased focus on non-US markets and transfer of products to CMO site
  • In CDMO-APIs, resolution of OAI status for Nanjangud facility remains key while the company works on cost optimisation and debottlenecking work. CDMO-API is undergoing asset replacement programmes for plant upgradation and capacity expansion with volumes expected to normalise in H2FY23
  • Drug discovery services is likely to witness increased traction sequentially as, in general, the first quarter is softer than the fourth. Greater Noida facility is likely to fully ramp up by Q4FY23
  • The company is guiding for capex of | 700-750 crore in FY23 primarily towards expansion in CMO business and enhancement of CRDS capabilities and capacities. Another | 250-300 crore is earmarked for product development expenditure.
Variance Analysis

  Q1FY23 Q1FY22 Q4FY22 YoY (%) QoQ (%)   Comments
Revenue 1,451.7 1,634.7 1,527.5 -11.2 -5.0   YoY decline due to poor show in CDMO Sterile Injectables and Generics
Raw Material Expenses 387.0 360.6 414.8 7.3 -6.7    
Gross margins (%) 73.3 77.9 72.8 -460 bps 49 bps    
Employee Expenses 529.2 499.2 510.4 6.0 3.7    
Other Expenditure 343.2 370.9 355.1 -7.5 -3.4    
Total Expenditure 1,259.3 1,259.4 1,280.2 0.0 -1.6    
EBITDA 192.4 375.2 247.4 -48.7 -22.2    
EBITDA (%) 13.3 23.0 16.2 -970 bps -294 bps   EBITDA margins Generics: -41%, CRDMO: 16.3%, CDMO Sterile Injectable:50% and Specialty Pharmaceutical:16.2%
Interest 39.9 34.6 39.5 15.3 1.1    
Depreciation 94.6 88.0 100.6 7.4 -5.9    
Other income 11.3 3.9 -3.0 190.7 LP    
 Exceptional Items 0.0 0.0 0.0 0.0 0.0    
PBT after Exceptional Items 69.2 256.5 104.3 -73.0 -33.7    
Tax  22.3 86.0 46.6 -74.1 -52.1    
Tax Rate (%) 32.2 33.5 44.6        
PAT before MI 46.9 170.5 57.8 -72.5 -18.8    
MI -0.3 -0.1 -0.5 NA NA    
Adj. Net Profit 47.0 160.6 59.6 -70.7 -21.0    
Key Metrics              
Generics 178.0 432.0 221.0 -58.8 -19.5   YoY decline due to 1) lower volumes due to import alert at Roorkee plant, 2) pricing pressure in the US market and 3) lower Remdesivir sales 
Specialty Pharma  722.0 632.0 695.0 14.2 3.9   Radiopharmaceuticals business witnessed improvement in sales driven by recovery from easing of Covid-19 pandemic. Radiopharmacies business witnessed growth YoY due to higher volumes led by recovery from Covid-19 and launch of new products. Allergy Immunotherapy continues to operate at volumes higher than pre-Covid levels
CDMO Sterile Injectables 263.0 373.0 288.0 -29.5 -8.7   YoY decline due to higher Covid related business during the previous quarters. Covid related deals of | 70 crore vs. | 220 crore in Q1FY22 and | 11 crore in Q4FY22
CRDMO 280.0 193.0 318.0 45.1 -11.9   Drug Discovery Services revenue increased amid higher demand from Biotech companies for integrated services, functional chemistry and DMPK. Chemistry volume increase supported by the Greater Noida facility. CDMO – API revenue grew YoY due to higher volumes

Terms & conditions and other disclosures


I/We, Siddhant Khandekar, Inter CA, Raunak Thakur, PGDM, Kush Mehta, CA, Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. It is also confirmed that above mentioned Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months and do not serve as an officer, director or employee of the companies mentioned in the report.

Terms & conditions and other disclosures:

ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products.

ICICI Securities is Sebi registered stock broker, merchant banker, investment adviser, portfolio manager and Research Analyst. ICICI Securities is registered with Insurance Regulatory Development Authority of India Limited (IRDAI) as a composite corporate agent and with PFRDA as a Point of Presence. ICICI Securities Limited Research Analyst SEBI Registration Number – INH000000990. ICICI Securities Limited SEBI Registration is INZ000183631 for stock broker. ICICI Securities is a subsidiary of ICICI Bank which is India’s largest private sector bank and has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. (“associates”), the details in respect of which are available on www.icicibank.com.


ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking and other business relationship with a significant percentage of companies covered by our Investment Research Department. ICICI Securities and its analysts, persons reporting to analysts and their relatives are generally prohibited from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.


Recommendation in reports based on technical and derivative analysis centre on studying charts of a stocks price movement, outstanding positions, trading volume etc as opposed to focusing on a companys fundamentals and, as such, may not match with the recommendation in fundamental reports. Investors may visit icicidirect.com to view the Fundamental and Technical Research Reports.


Our proprietary trading and investment businesses may make investment decisions that are inconsistent with the recommendations expressed herein.


ICICI Securities Limited has two independent equity research groups: Institutional Research and Retail Research. This report has been prepared by the Retail Research. The views and opinions expressed in this document may or may not match or may be contrary with the views, estimates, rating, and target price of the Institutional Research.


The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICI Securities. While we would endeavour to update the information herein on a reasonable basis, ICICI Securities is under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to this company, or in certain other circumstances.


This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities accepts no liabilities whatsoever for any loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice.


ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment in the past twelve months.


ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction.


ICICI Securities or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned in the report in the past twelve months.



ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its associates or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts and their relatives have any material conflict of interest at the time of publication of this report.


Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.


ICICI Securities or its subsidiaries collectively or Research Analysts or their relatives do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the publication of the research report.


Since associates of ICICI Securities and ICICI Securities as a entity are engaged in various financial service businesses, they might have financial interests or actual/ beneficial ownership of one percent or more or other material conflict of interest various companies including the subject company/companies mentioned in this report.


ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report.


Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report.


We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities.


This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.

Read More