MOSL: JUBILANT LIFE SCIENCES (Buy)-One-off impacts earnings-Margins to be range-bound in Pharma
Jubilant Life Sciences: One-off impacts earnings; Margins to be range-bound in Pharma
(JUBILANT IN, Mkt Cap USD1.4b, CMP INR596, TP INR800, 34% Upside, Buy)
- Pharma Segment drives revenue: Sales at INR23.8b (in-line) was up 6% YoY. Pharmaceutical sales were up 13% YoY at INR13.9b, while Life Science Ingredients (LSI) declined 6% YoY to INR9.1b, dragging overall growth.
- Change in product mix drags margins: Gross Margin (GM) stood at 59%, declining 120bp YoY/390bp QoQ, due to inferior product mix. A one-time charge of INR1b was recognized towards IPO expenses, penalties for non-supplies, litigation expenses and impact of higher cost inventory consumption in LSI. Adjusting for the same, EBITDA margin contracted ~100bp YoY to 19.3% (our est: 21.1%) due to higher raw material and employee cost as % of sales (21% vs 20% in 4QFY18).
- IFC loan repaid fully: During the quarter, JUBILANT paid USD135m as one-time full stock settlement charge to IFC, and recognized INR2.4b as exceptional item. Adjusting for these, PAT stood at INR2.2b (our est. INR2.6b) and was stable YoY. For FY19, sales/EBITDA/PAT stood at INR91b/INR18.4b/INR8.9b and was up 21%/21%/26% YoY.
Jubilant Life Science is an integrated pharmaceuticals and life sciences company. Co. offers a range of products and services to its customers across the globe. Co. operates two business segments: Pharmaceuticals and Life Sciences Products and Services and Agri and Performance Polymers ("APP"). In Co.'s Pharmaceuticals and Life Sciences Products and Services segment, Co. manufactures and provides Fine Chemicals and Advance Intermediates for the global pharmaceuticals, agrochemicals and life sciences industry. The products in Co.'s APP segment have various applications in industries such as pharmaceuticals, agrochemicals, textiles and foods.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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