MOSL: JUBILANT LIFE SCIENCES (Buy)-Pharma segment doing well, Life Science Ingredient segment to catch-up soon
Jubilant Life Sciences: Pharma segment doing well, Life Science Ingredient segment to catch-up soon; Superior execution in Pharma and favorable business scenario in LSI to drive growth
(JUBILANT IN, Mkt Cap USD1.9b, CMP INR777, TP INR957, 23% Upside, Buy)
- The outlook for the Pharmaceuticals and Life Science Ingredient (LSI) segments remains positive.
- Within Pharmaceuticals, we believe specialty pharma remains on a strong footing, led by superior execution in the radio-pharma, allergy and CMO businesses. LSI segment is expected to deliver a robust performance, driven by better demand and a favorable price environment.
- We roll forward our price target to INR957 (on an SOTP basis) from INR861. We re-iterate our Buy rating on the stock.
Radio-pharma, allergy and CMO businesses driving growth in Pharmaceuticals: Within Pharmaceuticals, we believe specialty pharma would continue driving growth, led by better traction from recent launches as well as existing products. In radiopharmaceuticals, while JLS continues enjoying better traction in existing products, the marketing effort for new products is expected to add to growth in CY18. The renewed focus on the allergy business has helped the company to outperform industry growth and expand its market share. Strong order book in CMO provides sufficient business visibility for the next 4-5 years. We expect specialty pharma to grow at a 16% CAGR (adjusting for Triad business) over FY17-20. Deferment of some business from 1HFY18 would aid growth in 2HFY18 for the API business.
Reduced supply from Chinese competitors to aid growth in LSI: In the LSI segment, the business scenario has improved for specialty intermediates and nutritional products due to lower supply from Chinese competitors as a result of production restrictions imposed by the Chinese government to reduce pollution. Even the life science chemical segment has been showing better traction, led by increasing business exposure to the ex-China market.
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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