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Multi Baggers

Ventura Securities

12.00 AM Jan 4th 2016

Jubilant Life

BSE ID : 530019     NSE ID : JUBILANT

RECOMMENDED PRICE 418.65

PEAK FROM RECO 879.10 109.98%

CURRENT PRICE 664.85 58.81%

Jubilant Life Sciences is an integrated global pharmaceutical & life Sciences company with a strong presence across India, North America, Europe, China and Japan. We initiate coverage on JUBL as a BUY with a price objective of Rs 647.

Jubilant LifeSciences

After facing multiple headwinds which impacted business growth and profitability, Jubilant LifeSciences Ltd. (JUBL) is all set to come out of this tumultuous period and stage a robust recovery, the glimpses of which are already evident.

We expect Jubilant’s revenues to grow at a 3-year CAGR of 9.5% over FY15 to FY18 to `7,655 crores with earnings are expected to turn the corner and report a profit of `736 crores in FY18 from a loss of `58 crores in FY15. This resurgence is expected to be driven by recovery in the Contract Manufacturing Operations (CMO), continued robust growth of the Radiopharma segment, steady state performance of the solid dosage portfolio and uptick in the nutritional products business. Rebounding margins are expected to bolster profit growth.

We initiate coverage on JUBL as a BUY with a price objective of Rs 647. At CMP of Rs 418.65 the stock is trading at 10.5X and 8.9X its FY17 and FY18 earnings estimates. Our target price represents a potential upside of 58% over a period of 24 months.

Our optimism stems from the fact that:

Revenues of the company are expected to grow at a 3-year CAGR of 9.5% from `5,827 crores to `7,655 crores while margins of the company, which have already rebounded to it steady state of 22.2% are expected to remain firm on the back of following reasons:

US FDA clearance of the Spokane facility will lead to a bounce back in CMO revenues from Rs 448 crores in FY15 to `706 crores by FY18. Further, it will also arrest the expenditure that the company had been incurring for compliance purpose.

Radiopharma business is expected to sustain the growth traction over the coming years and is expected clock a growth of 25.9% over FY15-FY18.

API (9.6% 3-year CAGR) and Solid dosage (7.8% 3-year CAGR) verticals are expected to witness an uptick on the back of improving demand dynamics and commercialization of newer filings.

The Drug discovery and anti - Allergic products businesses are also expected to regain the growth trajectory from exposure to newer geographies and other initiatives to generate new clientele.

Upward movement in the prices of Niacinamide is expected to drive the growth of Nutritional products and lead to an improvement in the margins of this segment.

JUBL is inching closer towards getting the approval for Ruby-fill. If the approval comes as expected i.e. towards the end of FY17, we could see a sharp jump in the revenue of radiopharma segment.

To keep a check on its leverage position, Jubilant has tapered its capex plans and in coming years will focus more on debottlenecking its capacities. Moreover it has also refinanced large portion of its debt into INR denomination to insulate itself from forex fluctuations.

JUBL is also contemplating a QIP issue and/or listing of its pharmaceutical business in the US to garner funds which can bring down the total debt of the company by other `1,000 crores in FY18.

We initiate coverage on Jubilant Lifesciences Ltd. as a BUY with a price objective of Rs 647 representing a potential upside of 56% from the of 418.65 over a period of 24 months. We have used P/E multiple approach to value Jubilant LifeSciences Ltd and assigned a multiple of 14X on FY18 EPS of `46.2 to arrive at the target price.

For full details, Click on the attachment.

Disclosures and Disclaimer: Ventura Securities Limited (VSL) is a SEBI registered intermediary offering broking, depository and portfolio management services to clients. VSL is member of BSE, NSE and MCX-SX. VSL is a depository participant of NSDL. VSL states that no disciplinary action whatsoever has been taken by SEBI against it in last five years except administrative warning issued in connection with technical and venial lapses observed while inspection of books of accounts and records. Ventura Commodities Limited, Ventura Guaranty Limited, Ventura Insurance Brokers Limited and Ventura Allied Services Private Limited are associates of VSL. Research Analyst (RA) involved in the preparation of this research report and VSL disclose that neither RA nor VSL nor its associates (i) have any financial interest in the company which is the subject matter of this research report (ii) holds ownership of one percent or more in the securities of subject company (iii) have any material conflict of interest at the time of publication of this research report (iv) have received any compensation from the subject company in the past twelve months (v) have managed or co-managed public offering of securities for the subject company in past twelve months (vi) have received any compensation for investment banking merchant banking or brokerage services from the subject company in the past twelve months (vii) have received any compensation for product or services from the subject company in the past twelve months (viii) have received any compensation or other benefits from the subject company or third party in connection with the research report. RA involved in the preparation of this research report discloses that he / she has not served as an officer, director or employee of the subject company. RA involved in the preparation of this research report and VSL discloses that they have not been engaged in the market making activity for the subject company. Our sales people, dealers, traders and other professionals may provide oral or written market commentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressed herein. We may have earlier issued or may issue in future reports on the companies covered herein with recommendations/ information inconsistent or different those made in this report. In reviewing this document, you should be aware that any or all of the foregoing, among other things, may give rise to or potential conflicts of interest. We may rely on information barriers, such as "Chinese Walls" to control the flow of information contained in one or more areas within us, or other areas, units, groups or affiliates of VSL. This report is for information purposes only and this document/material should not be construed as an offer to sell or the solicitation of an offer to buy, purchase or subscribe to any securities, and neither this document nor anything contained herein shall form the basis of or be relied upon in connection with any contract or commitment whatsoever. This document does not solicit any action based on the material contained herein. It is for the general information of the clients / prospective clients of VSL. VSL will not treat recipients as clients by virtue of their receiving this report. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of clients / prospective clients. Similarly, this document does not have regard to the specific investment objectives, financial situation/circumstances and the particular needs of any specific person who may receive this document. The securities discussed in this report may not be suitable for all investors. The appropriateness of a particular investment or strategy will depend on an investor's individual circumstances and objectives. Persons who may receive this document should consider and independently evaluate whether it is suitable for his/ her/their particular circumstances and, if necessary, seek professional/financial advice. And such person shall be responsible for conducting his/her/their own investigation and analysis of the information contained or referred to in this document and of evaluating the merits and risks involved in the securities forming the subject matter of this document. The projections and forecasts described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. Projections and forecasts are necessarily speculative in nature, and it can be expected that one or more of the estimates on which the projections and forecasts were based will not materialize or will vary significantly from actual results, and such variances will likely increase over time. All projections and forecasts described in this report have been prepared solely by the authors of this report independently of the Company. These projections and forecasts were not prepared with a view toward compliance with published guidelines or generally accepted accounting principles. No independent accountants have expressed an opinion or any other form of assurance on these projections or forecasts. You should not regard the inclusion of the projections and forecasts described herein as a representation or warranty by VSL, its associates, the authors of this report or any other person that these projections or forecasts or their underlying assumptions will be achieved. For these reasons, you should only consider the projections and forecasts described in this report after carefully evaluating all of the information in this report, including the assumptions underlying such projections and forecasts. The price and value of the investments referred to in this document/material and the income from them may go down as well as up, and investors may realize losses on any investments. Past performance is not a guide for future performance. Future returns are not guaranteed and a loss of original capital may occur. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice. 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The opinions and projections expressed herein are entirely those of the author and are given as part of the normal research activity of VSL and are given as of this date and are subject to change without notice. Any opinion estimate or projection herein constitutes a view as of the date of this report and there can be no assurance that future results or events will be consistent with any such opinions, estimate or projection. This document has not been prepared by or in conjunction with or on behalf of or at the instigation of, or by arrangement with the company or any of its directors or any other person. Information in this document must not be relied upon as having been authorized or approved by the company or its directors or any other person. Any opinions and projections contained herein are entirely those of the authors. 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JubilantLifeSci_PYT.pdf

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