Jubilant Pharmova Q1 Results Review - Inline Performance; Margin Improvement Should Sustain: Systematix

Systematix Research Report

Jubilant Pharmova Ltd.’s Q1 revenue (Rs 17,317 million) and Ebitda (Rs 2,515 million) was in-line with our estimates while net earnings (Rs 4,818 million) were below our estimates owing to higher-than-expected costs related to Salisbury plant closure and certain other provisions.

A 9% growth in revenue on a YoY basis was led by growth in Ruby-Fill and new product sales in radiopharmaceuticals, volume growth in radio pharmacies, continued growth momentum in Allergy Immunotherapy business and contract development manufacturing organisation Sterile Injectables.

Ebitda margins expanded 400 bps YoY led by margin improvement across business segments - Radiopharma (200 bps), Allergy Immunotherapy (500 bps), CDMO Sterile Injectables (400 bps), CRDMO (400 bps) and Generics (300 bps).

On a QoQ basis, revenue was lower 2% and Ebitda was lower 7% as Q4 is seasonally a strong quarter for the company. Over the next three quarters (FY25), the earnings growth momentum should accelerate led by attainment of break even in generic business, reduction in interest costs (debt repayment) and sustained revenue growth in other business segments and margin expansion in radio pharmacy.

The radiopharma facility at Montreal which was inspected by the U.S. Food and Drug Administration recently has been granted VAI status and this addresses a potential overhang on the stock. However, wrt to the 15 observations received recently at the CMO facility at Montreal, the U.S. FDA action is awaited. The facility is already under official action indicated.

Less than 10% of company CMO revenue are out of Montreal and hence even in the worst case, the impact should be around 5% to 6% of annual Ebitda.

We expect ongoing remediation at Montreal facility to temporarily impact momentum in CMO business (Q2 FY25). We tweak our forecasts on Jubilnt Pharmova and expect 25% CAGR Ebitda growth over FY24 to FY27E.

We retain our Buy rating on Jubilant Pharmova with a price target of Rs 889 based on 11 times FY26E EV/Ebitda multiple. The key levers for Ebitda growth being high single digit to low double digit topline growth, turnaround of generic business from losses to profits (closure of Salisbury and revival of exports from Roorkee), and operating leverage.

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