"At the current juncture, the company is in a sweet spot, where most of its businesses are supported by favourable market conditions. The life sciences ingredient business is moving positively by virtue of a strong demand environment," says Siddharth Sadani of Anand Rathi Financial Services.
Siddharth Sadani
Jubilant Lifesciences supplies products and services to customers in over 100 countries. Its fundamentals are robust as it has created a business model with high entry barriers. In the life sciences ingredients space, where scale is the critical success parameter and is the leader in most product categories it manufactures (Pyridine and Niacin).
At the current juncture, the company is in a sweet spot, where most of its businesses are supported by favourable market conditions. The life sciences ingredient business is moving positively by virtue of a strong demand environment. Likewise, the radio pharmacy business is also on a growth trajectory by virtue of long-term supply contracts it has finalised with wholesalers in the US market and recent launch of Ruby–Fill in the US.
To meet the increased demand in its businesses, Jubilant Life has planned to invest about Rs 550 crore in capital expenditure in FY19. In addition, it plans to invest Rs 300 crore in R&D during the year, including Rs 150 crore in product development expenditure.
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With the present headwinds in generic pharma space, the company being a niche player with presence across radiopharmaceutical segment, CMO and Life Science Chemical and with limited exposure to generics is placed well along with its ramp up of operations across segments and revenue visibility over next few years.
We initiate our coverage on Jubilant Life Sciences with a buy rating and target price of Rs 1040 per share.
Disclaimer: The author is Vice-President - Head Equity Advisory at Anand Rathi Financial Services. The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.