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Jubilant Life Sciences (JOL)
Pharmaceuticals
Significant operational improvement though may not be sustainable. Sales were
in line with our estimate with margin surprising at 20% versus our estimate of 17.5%,
up 470 bps qoq due to (1) pick-up in life science ingredients with generics flat qoq in
dollar terms, (2) milestone income and (3) pricing increase of around 5% yoy. However,
we remain skeptical about the company sustaining this performance as (1) life science
ingredients volume growth of around 11% is lower than 14% in FY2011and (2)
services business margin is up sharply on receipt of milestone income. We increase
FY2012-13E estimates by 2-18% to reflect higher product margin and sales from
Symtet plant. Maintain REDUCE with PT at Rs225 (was Rs195), 10X FY2013E EPS.
1QFY12 revenues, up 6% qoq, in line with our estimate
Sales at Rs9.4 bn were in line with our estimate (1) services business (22% of sales) up 7% qoq
due to pick-up in CMO sales, up US$5 mn qoq and receipt of milestone income in drug discovery
business, although DDDS sales were still 8% lower qoq, (2) products business grew 6% qoq led by
lifecycle ingredients business, up US$10 mn qoq on account of volume growth and price increases
with generics flat qoq. Overall volume growth was 11% and price growth was 5% leading to yoy
sales growth of 16%.
EBITDA margin at 20% was higher than our estimate of 17.5%
EBITDA margin (including other income of Rs50 mn) was up 472 bps qoq at 20% on account of
(1) higher margin in products business at 23%, up from 19.6%, in 4QFY11 and flat yoy due to
volume growth and pricing increase as prices had dipped in 2HFY11 resulting in poor margin in
4QFY11, and (2) services business margin increased to 17%, from 10% in 4QFY11 and 6% in
1QFY11. We believe such sharp sequential improvement is likely on account of milestone income
from two partners—Astrazeneca and Endo as reported by the company in June 2011.
We increase FY2012-13E estimates by 2-18%
We expect EBITDA margin to sustain in the products business at 20% in 9MFY12E versus 23% in
1QFY12 and at 13% in services versus 17% in 1QFY12 as excluding milestone income, drug
discovery is yet to show sales improvement. We believe (1) life science ingredients (65% of sales)
still continue to face headwinds of declining volume growth—assuming pricing growth is 5% in
line with overall pricing growth, volume growth is around 11% for this business in 1QFY12, flat
qoq and down from 15% in 3QFY11 and 14% in FY2011, and (2) EBITDA margin in services
business is not sustainable as it’s likely to have been boosted by receipt of milestone fees this
quarter.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Jubilant Life Sciences (JOL)
Pharmaceuticals
Significant operational improvement though may not be sustainable. Sales were
in line with our estimate with margin surprising at 20% versus our estimate of 17.5%,
up 470 bps qoq due to (1) pick-up in life science ingredients with generics flat qoq in
dollar terms, (2) milestone income and (3) pricing increase of around 5% yoy. However,
we remain skeptical about the company sustaining this performance as (1) life science
ingredients volume growth of around 11% is lower than 14% in FY2011and (2)
services business margin is up sharply on receipt of milestone income. We increase
FY2012-13E estimates by 2-18% to reflect higher product margin and sales from
Symtet plant. Maintain REDUCE with PT at Rs225 (was Rs195), 10X FY2013E EPS.
1QFY12 revenues, up 6% qoq, in line with our estimate
Sales at Rs9.4 bn were in line with our estimate (1) services business (22% of sales) up 7% qoq
due to pick-up in CMO sales, up US$5 mn qoq and receipt of milestone income in drug discovery
business, although DDDS sales were still 8% lower qoq, (2) products business grew 6% qoq led by
lifecycle ingredients business, up US$10 mn qoq on account of volume growth and price increases
with generics flat qoq. Overall volume growth was 11% and price growth was 5% leading to yoy
sales growth of 16%.
EBITDA margin at 20% was higher than our estimate of 17.5%
EBITDA margin (including other income of Rs50 mn) was up 472 bps qoq at 20% on account of
(1) higher margin in products business at 23%, up from 19.6%, in 4QFY11 and flat yoy due to
volume growth and pricing increase as prices had dipped in 2HFY11 resulting in poor margin in
4QFY11, and (2) services business margin increased to 17%, from 10% in 4QFY11 and 6% in
1QFY11. We believe such sharp sequential improvement is likely on account of milestone income
from two partners—Astrazeneca and Endo as reported by the company in June 2011.
We increase FY2012-13E estimates by 2-18%
We expect EBITDA margin to sustain in the products business at 20% in 9MFY12E versus 23% in
1QFY12 and at 13% in services versus 17% in 1QFY12 as excluding milestone income, drug
discovery is yet to show sales improvement. We believe (1) life science ingredients (65% of sales)
still continue to face headwinds of declining volume growth—assuming pricing growth is 5% in
line with overall pricing growth, volume growth is around 11% for this business in 1QFY12, flat
qoq and down from 15% in 3QFY11 and 14% in FY2011, and (2) EBITDA margin in services
business is not sustainable as it’s likely to have been boosted by receipt of milestone fees this
quarter.
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