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Jubilant Life Sciences
Weak quarter, recovery ahead
Q2FY11 results. Jubilant reported weak Q2FY11 results, with
revenue growth of only 5.8% yoy. EBITDA margin declined
410bps yoy due to exchange rate volatility and pricing pressure.
Adjusted PAT grew 21.3% yoy led by lower interest cost and
lower tax expense.
Volume growth strong. The company’s pharma business grew
3% yoy led by 5% growth in the life science products segment.
However, the volume growth was at 13%, which indicates
recovery in the outsourcing business. However, life science
services declined 3% yoy due to slow regulatory approvals and
slowdown in clinical research industry in the US.
Key highlights. The agri products & performance polymer
(APP) business (14% of total revenue) grew a strong 29% yoy,
driven by price stabilisation and nutrition-based subsidy in agri
products. The company has received court approval for demerger
of APP business which would be listed separately in Jan ’11.
Outlook. We expect recovery in growth from 2HFY11 on the
back of strong CRAMS order book and commercialisation of new
contracts. Margins would also improve, with higher revenue
growth and increasing capacity utilisation.
Valuation and risks. At CMP, Jubilant trades at 12.2x FY11e
and 11x FY12e earnings. We retain our target price of `411 and
re-iterate Buy. Risk: Delay/failure in execution of contracts
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