MOSL: JUBILANT LIFE SCIENCES | INITIATING COVERAGE-Promising formulation-Multiple triggers in place to drive earnings

​Jubilant Life Sciences | initiating coverage: Promising formulation; Multiple triggers in place to drive earnings

(JOL IN, Mkt Cap USD1.7b, INR692, TP INR905, 31% Upside, Buy)

• Jubilant Life Sciences (JLS), part of Jubilant Bhartia Group, is an integrated pharmaceuticals and life sciences company engaged in the manufacture of radiopharmaceuticals, allergy products, generics, advance intermediates, nutritional products and life science chemicals. JLS also provides services in contract manufacturing and drug discovery solutions. JLS’ operations are spread across the world, including India, the US, Canada, Europe and other countries.
• All sub-segments in pharmaceuticals (52% of total sales) are well poised for growth, in our view. Compared to peers, JLS has a unique portfolio of specialty pharmaceuticals, which includes radiopharmaceuticals, allergy products and CMO. We expect the company’s differentiated products & distribution strategy and long-term contracts to lead to 18% CAGR (FY17-20) in radiopharmaceuticals sales, while enhanced marketing efforts to improve productivity should lead to 20% CAGR (over FY17-20) in allergy products sales. High entry barriers for developing and manufacturing are expected to further improve profitability.
• JLS is also expected to perform well in the life science ingredients (LSI) segment (45% of total sales), driven by product launches and price hikes in key products. Post 4.2% compounded decline in revenues over FY14-17 due to product-specific issues, LSI is expected to post revenue CAGR (FY17-20) of 10.2% to INR36.2b.