Rakesh Jhunjhunwala-owned pharma stock may see covid vaccine windfalls; ICICI Direct sees 26% upside

Jubilant Pharmova said that the CDMO segment has a strong visible order book of Rs 3,600 crore to be serviced over the next three years. (Image: REUTERS)

Rakesh Jhunjhunwala-owned Jubilant Pharmova could benefit from contract manufacturing deals signed for covid-treatment and vaccines, according to brokerage and research firm ICICI Direct. During the previous quarter, the company saw its revenue from the CDMO segment grow 48% on-year basis to Rs 574 crore even though overall revenue growth was flat. Foreseeing further growth in the CDMO segment, aided by covid treatment and vaccines, domestic brokerage and research firm ICICI Direct has upped the target price for Jubilant Pharmova. On Monday, the stock was down 5%, trading at Rs 792 per share.

Radiopharma de-growth keeps performance flat

Jubilant Pharmova saw revenues slip in the radiopharma segment, down 23.5% on-year basis. The company management said that two lungs scan related radiopharma products were impacted due to lower diagnostic testing and patient footfall amid the Covid-19 pandemic. The Allergy business of the firm is now back to pre-covid levels. The generics segment recorded muted on-year growth and a sharp decline sequentially amid a decline in Remdesivir sales and pricing pressure in a few products in the US. Overall, Jubilant Pharmova reported a 13.7% fall in net profit to Rs 183 crore.

Although the performance in the quarter was muted by the de-growth in the Radiopharma segment, the management expects a gradual recovery in the division supported by one new launch this fiscal year and normalcy in the base business. “Going ahead, we expect the company to post better margin performance and to be back on the growth track thanks to cost rationalisation measures and strong order book visibility in the CDMO segment along with partnerships for generic products,” ICICI Direct said. Analysts at ICICI Direct added that a key monitorable for the company would be developments on the CDMO agreements that the company has signed for Covid treatment and vaccine candidates. Jubilant Pharmova said that the CDMO segment has a strong visible order book of Rs 3,600 crore to be serviced over the next three years.

Massive upside potential seen

ICICI Direct has a target price of Rs 1,000 per share on Jubilant Pharmova, translating to a 26% upside from the current price. Jubilant Pharmova consists of Jubilant Pharma, Biosys and Therapeutics business of the erstwhile  Jubilant Life Sciences. The company demerged into Jubilant Ingrevia and Jubilant Pharmova in February this year. Big bull Rakesh Jhunjhunwala owns a 6.3% stake in the company. The current value of his stake is close to Rs 793 crore.