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JubilantLifeSciences

August12,2015
SurajitPal
surajitpal@plindia.com
+912266322259

Rating
Price
TargetPrice
ImpliedUpside
Sensex
Nifty

BUY
Rs313
Rs578
84.7%
27,866
8,462

(PricesasonAugust12,2015)
Tradingdata
MarketCap.(Rsbn)
Shareso/s(m)
3MAvg.Dailyvalue(Rsm)
Majorshareholders
Promoters
Foreign
DomesticInst.
Public&Other
StockPerformance
(%)
1M
6M
Absolute
54.9
101.8
Relative
54.2
104.2
HowwedifferfromConsensus
EPS(Rs)
PL
Cons.
2016
34.0
18.9
2017
47.3
28.4

48.4
154.5
216.1

Jubilants reported sales of Rs14.6bn, in line with estimates in Q1FY16, while its
EBITDA and PAT outperformed our estimates by 10% and 51% respectively.
Jubilants strong traction in Radiopharma, API, recovery in CMO and favourable
pricinginNutritionalproductsweremajorcontributorsofstrongheadlinemargins
in Q1FY16. The companys 900bps improvement in raw material costs also
contributed for 540bps improvement in sequential EBITDA margin. With stable
Pyridine price, Jubilant received strong benefits of lower crude price and ethanol
priceinLSIbusiness.ItsPharmabusinessreceivedbenefitsofpriceriseandhigher
volumeinRadiopharma,supplyofAripiprazoletoApotexandgrowingrecoveryof
CMOplantinSpokaneinQ1FY16.
Jubilants strong traction in both of its segmental business (Pharma and LSI) was
alsoreflectedinROCEofthesegmentalassets.ROCEofPharmaandLSIincreased
to 17.5% and 23%, highest in last eight quarters. While Pharma business gained
from higher price, its LSI gained from efficient operating leverage. We expect
pricing scenario in Pyridines to improve in H2FY16E while Pharma business to
receivebettergrowthinsalesandmarginfromtherecoveryofCMObusiness.We
increaseourestimatesinEBITDAandPATby24%and49%inFY16Eand27%and
64%inFY17E.WemaintainBUYwith86%increaseinourTPtoRs578.
Exhibit1: ChangeinEstimates

54.02%
16.94%
0.79%
28.25%
12M
82.3
73.1
%Diff.
79.5
66.5

PricePerformance(RIC:JULS.BO,BB:JOLIN)

EBITDA(Rsm)

Year

Old

PAT(Rsm)

New Diff(%)

Old

EPS(Rs)

New Diff(%)

Old

New

FY16E

11,125

13,743

24

3,634

5,417

49

22.8

34.0

FY17E

12,871

16,327

27

4,594

7,532

64

28.8

47.3

Source:PLResearch
Keyfinancials(Y/eMarch)

Revenues(Rsm)
Growth(%)
EBITDA(Rsm)

PAT(Rsm)
EPS(Rs)
Growth(%)
NetDPS(Rs)

2014
57,216
11.9
9,259
3,235
20.9
(3.2)
3.0

2015
57,761
1.0
6,392
(97)
(0.6)
NA
3.0

2016E
65,443
13.3
13,743
5,417
34.0
NA
3.0

2017E
73,547
12.4
16,327
7,532
47.3
39.0
3.0

2014
16.2
12.7
8.1
1.5
9.5
15.0
1.8
1.0

2015
11.1
(0.4)
3.5
1.5
13.8
NA
2.0
1.0

2016E
21.0
19.6
12.2
1.3
6.1
9.2
1.6
1.0

2017E
22.2
21.9
14.6
1.0
4.7
6.6
1.3
1.0

Source:Bloomberg

Aug15

Jun15

Apr15

Feb15

Dec14

Oct14

Aug14

(Rs)
350
300
250
200
150
100
50
0

Profitability&Valuation
EBITDAmargin(%)
RoE(%)
RoCE(%)
EV/sales(x)
EV/EBITDA(x)
PE(x)
P/BV(x)
Netdividendyield(%)
Source:CompanyData;PLResearch

PrabhudasLilladherPvt.Ltd.and/oritsassociates(the'Firm')doesand/orseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresultinvestorsshouldbeawarethat
theFirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthereport.Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.

Pleaserefertoimportantdisclosuresanddisclaimersattheendofthereport

Q1FY16ResultUpdate

Salesinline,EBITDA,PATbeatestimates

JubilantLifeSciences

KeytakewaysfromConferencecall

Chinasalesdeclinedby53%YoYonthebackoflowerexportofPyridines.With
strong pricing pressure along with lower demand of Pyridines due to ban on
productionofliquidParaquat,JubilantconsciouslylowereditsexportsinChina.
Management expects Paraquat producers in China to upgrade technology to
producenonliquid(powder/gel)formofParaquat,whichwillimprovedemand
scenarioofpyridinegoingforward

Global Pyridine prices are stable globally though prices in China are still down
visavisglobalprice

The price hike of 10% in nutritional products (niacinamide/Niacin) in Q1FY16


wasoneofthemajorcontributorsofthecompanys16.9%EBITDAmargininLSI
segment

Lower ethanol price and crude oil price helped the company to reduce raw
materialcostsby10%sequentiallyinQ1FY16

JubilantreceivedbenefitofhigherpricesandvolumeofRadiopharmainNorth
America. Management expect the favourable pricing scenario to continue in
FY16E while new launches (RubiFill, Magnevist) will boost its sales growth
furtherinFY16EandFY17E

US FDA upgraded Jubilants CMO plant in US (Spokane, Washington) to VAI


(voluntary action intended) and expect to receive complete resolution on the
plantinnearterm.WhileCMObusinessreceivepartialrecoveryinQ1FY16,we
expecttherearestrongheadroomofimprovementinPharmasalesandmargin
onthebackofturnaroundinCMObusinessinFY16EandFY17E

JubilantreceivedstrongtractioninAPIsalesinQ1FY16.Webelievethecompany
gain from supply of Aripiprazole to Apotex post its approval of the drug in
limited competition period. This has also helped strong margin in Pharma
businessinQ1FY16

Jubilantlaunchedthreegenericswileithas33ANDApendingforapprovalinUS.
Thecompanyplanstofile810ANDAannually

ThecompanyplansRs3bncapexandRs1bnproductdevelopmentinFY16E

August12,2015

Exhibit2:

JubilantLifeSciences

Q1FY16ResultOverview(Rsm)

Y/eMarch

Q1FY16

Q1FY15

YoYgr.(%)

Q4FY15

FY16E

FY15

YoYgr.(%)

NetSales

14,586

14,731

(1.0)

15,365

65,443

57,761

13.3

6,480

8,182

(20.8)

8,088

33,965

34,919

(2.7)

44.4

55.5

52.6

51.9

60.5

2,742

2,722

0.7

2,751

12,041

10,903

17.9

18.4

18.9

(12.8)

2,052

5,694

5,548

13.4

8.7

9.6

RawMaterial

%ofNetSales

PersonnelCost

%ofNetSales

10.4

18.8

18.5

2,070

2,372

%ofNetSales

14.2

16.1

TotalExpenditure

11,291

13,276

(15.0)

12,891

51,700

51,370

0.6

3,294

1,455

126.4

2,474

13,743

6,392

115.0

22.6

9.9

16.1

21.0

11.1

Others

EBITDA

Margin(%)

Depreciation
EBIT
OtherIncome
Interest
PBT
ExtraOrd.Inc./Exps.

2.6

702

731

(3.9)

662

3,277

2,880

13.8

2,592

725

257.7

1,812

10,466

3,512

198.0

38

42

(8.4)

58

935

926

1.0

964

779

23.8

854

4,178

3,553

17.6

1,666

(13)

NA

1,017

7,223

884

716.8

19

(233)

NA

339

(657)

NA

TotalTaxes

405

(293)

NA

251

1,806

805

124.4

ETR(%)

24.3

NA

24.7

25.0

91.0

ReportedPAT

1,281

48

NA

427

5,417

(578)

NA

Q1FY16

Q1FY15

YoYgr.(%)

Q4FY15

FY16E

FY15

YoYgr.(%)

22.6

7,626

31,040

26,820

15.7

49.6

47.4

46.0

(17.5)

7,740

34,403

31,442

50.4

52.6

54.0

(1.1)

15,365

65,443

58,263

Source:CompanyData,PLResearch
Exhibit3:

MajorSourcesofRevenues(Rsm)

Y/eMarch
Pharmaceuticals

7,409

6,042

%ofNetSales

50.8

41.0

LifeScienceingredients

7,177

8,699

%ofNetSales

TotalSales

49.2

59.0

14,586

14,741

9.4
12.3

Source:CompanyData,PLResearch

August12,2015


IncomeStatement(Rsm)
Y/eMarch
2014
NetRevenue
RawMaterialExpenses
GrossProfit
EmployeeCost
OtherExpenses
EBITDA
Depr.&Amortization
NetInterest
OtherIncome
ProfitbeforeTax
TotalTax
ProfitafterTax
ExOditems/Min.Int.
Adj.PAT
Avg.SharesO/S(m)
EPS(Rs.)

57,216
24,421
32,796
11,052
12,485
9,259
2,812
3,237
1,008
4,218
696
3,521
(4,004)
3,235
154.5
20.9

2015

2016E

2017E

57,761
26,617
31,144
10,903
13,850
6,392
2,880
3,553
926
884
805
79
(786)
(97)
159.3
(0.6)

65,443

25,130
40,313
12,041
14,528
13,743
3,277
4,178
935
7,223
1,806
5,417

5,417
159.3
34.0

73,547
27,948
45,599
13,238
16,033
16,327
3,527
3,703
944
10,043
2,511
7,532

7,532
159.3
47.3

JubilantLifeSciences

BalanceSheetAbstract(Rsm)
Y/eMarch
2014

2015

2016E

2017E

26,265
43,953
6,260
76,478
55,712

340
17,153
4,795
24,485
12,128
3,274
76,478

24,535
42,085
3,449
70,068
55,079

395
11,026
3,943
23,336
16,254
3,569
70,068

30,879
37,336
3,891
72,106
56,302

407
11,793
4,023
24,048
16,278
3,604
72,106

37,836
31,389
4,450
73,674
57,276

419
12,447
4,372
25,209
17,134
3,532
73,674

QuarterlyFinancials(Rsm)
Y/eMarch
Q2FY15

Q3FY15

Q4FY15

Q1FY16

14,455
1,853
12.8
795
858
(42)
158
202
(112)
(112)

15,365
2,474
16.1
662
792
(4)
1,017
251
427
427

14,586
3,294
22.6
702
927
1
1,666
405
1,281
1,281

2014

2015

2016E

2017E

Pharmaceuticals
27,274
LSI
30,760
Source:CompanyData,PLResearch.

26,820
31,442

31,040
34,403

36,970
36,577

Shareholder'sFunds

TotalDebt
OtherLiabilities
TotalLiabilities
NetFixedAssets
Goodwill
Investments
NetCurrentAssets
Cash&Equivalents
OtherCurrentAssets
CurrentLiabilities
OtherAssets
TotalAssets

CashFlowAbstract(Rsm)
Y/eMarch
C/FfromOperations
C/FfromInvesting
C/FfromFinancing
Inc./Dec.inCash
OpeningCash
ClosingCash
FCFF
FCFE

2014

2015

2016E

2017E

8,026
(1,744)
(4,447)
1,834
2,786
4,735
1,115
2,616

3,585
(3,473)
(5,997)
(5,884)
4,735
(1,149)
(2,823)
(4,691)

11,591
(4,466)
(7,044)
80
3,943
4,023
3,507
(1,242)

13,965
(4,466)
(9,115)
384
3,988
4,372
6,253
305

Revenue(%)
EBITDA(%)
PAT(%)
EPS(%)

Profitability
EBITDAMargin(%)
PATMargin(%)
RoCE(%)
RoE(%)

BalanceSheet
NetDebt:Equity
NetWrkngCap.(days)

Valuation
PER(x)
P/B(x)
EV/EBITDA(x)
EV/Sales(x)

EarningsQuality

13,711
1,110
8.1
692
743
47
(278)
645
(941)
(941)

KeyFinancialMetrics
Y/eMarch
Growth

NetRevenue
EBITDA
%ofrevenue
Depr.&Amortization
NetInterest
OtherIncome
ProfitbeforeTax
TotalTax
ProfitafterTax
Adj.PAT

2014

2015

2016E

11.9
(7.7)
(6.2)
(3.2)

1.0
(31.0)
NA
NA

13.3
115.0
NA
NA

12.4
18.8
39.0
39.0

21.0
8.3
12.2
19.6

22.2
10.2
14.6
21.9

1.1
139

0.7
128

9.2
1.6
6.1
1.3

6.6
1.3
4.7
1.0

25.0
12.9
4.9
NA

25.0
9.4
4.9
4.0

16.2
5.7
8.1
12.7

11.1
(0.2)
3.5
(0.4)

1.5
145

1.6
125

15.0
1.8
9.5
1.5

NA
2.0
13.8
1.5

Eff.TaxRate
16.5
OtherInc/PBT
23.9
Eff.Depr.Rate(%)
3.8
FCFE/PAT
80.9
Source:CompanyData,PLResearch.

91.0
104.7
4.6
NA

2017E

KeyOperatingMetrics(Rsm)
Y/eMarch

August12,2015

JubilantLifeSciences

PrabhudasLilladherPvt.Ltd.
3rdFloor,SadhanaHouse,570,P.B.Marg,Worli,Mumbai400018,India

Tel:(9122)66322222Fax:(9122)66322209
RatingDistributionofResearchCoverage

PLsRecommendationNomenclature

%ofTotalCoverage

60%
50%
40%

48.0%
39.0%

30%
20%

13.0%

10%

0.0%

0%
BUY

Accumulate

Reduce

BUY

Over15%OutperformancetoSensexover12months

Accumulate

OutperformancetoSensexover12months

Reduce

UnderperformancetoSensexover12months

Sell

Over15%underperformancetoSensexover12months

TradingBuy

Over10%absoluteupsidein1month

TradingSell

Over10%absolutedeclinein1month

NotRated(NR)

Nospecificcallonthestock

UnderReview(UR) :

Sell

Ratinglikelytochangeshortly

DISCLAIMER/DISCLOSURES
ANALYSTCERTIFICATION
We/I,Mr.SurajitPal(PGDBA,CFA,M.Com),ResearchAnalysts,authorsandthenamessubscribedtothisreport,herebycertifythatalloftheviewsexpressedinthisresearchreportaccuratelyreflectourviewsaboutthe
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August12,2015