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24 July 2021
1QFY22 Results Update | Sector: Pharmova
TP: INR830 (+19%)
Radiopharma on a gradual recovery path
Import alert slows growth prospects in the Generic segment
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
111 / 1.5
982 / 598
JP delivered in line earnings, despite a better than expected revenue in
1QFY22. The COVID-related business led to a strong YoY revenue growth.
However, reduced number of lung procedures in the Radiopharma segment,
increased price erosion in the Sartans portfolio, and price erosion in the base
portfolio in the Generics segment led to lower-than-expected profitability,
offsetting benefits of higher revenue.
We have reduced our FY22E/FY23E EPS estimate by 14% each to factor in: a)
delay in potential products on account of the import alert at Roorkee, b)
higher competitive pressures in the Generics portfolio, c) gradual recovery in
Radiopharma sales, and d) lower operating leverage. We continue to value JP
at 8x 12-month forward EV/EBITDA to arrive at our PT of INR830. We remain
positive on JP due to its attractive valuation and improving outlook in the
Specialty segment. We maintain our
Net sales grew 41% YoY to INR16.3b (est: INR13.6b), led by a 70%/54%/55%
growth in CDMO/Generics/Contract Research and Development Services
revenue (29%/27%/5% of sales; INR4.7b/INR4.4b/INR880m). Specialty
Pharma sales grew 18% YoY to INR6.3b (39% of sales).
Gross margin contracted by 120bp YoY to 77.9% in 1QFY22 due to the
reduced share of Specialty Pharma. EBITDA margin, however, expanded by
750bp YoY to 23% (est: 26%) due to better operating leverage. Employee
expense fell 1,070bp YoY as a percentage of sales, partially offset by higher
other expense (+210bp YoY as a percentage of sales).
EBITDA almost doubled to INR3.8b (est: INR3.5b).
Adjusted PAT grew ~4.5x YoY to INR1.6b (in line) on a lower base of 1QFY21,
which was severely impacted by the COVID-19 outbreak.
JP is reorganizing its API business after the demerger from Jubilant Generics
(a wholly-owned subsidiary) and vesting the same under JP. It would create
service offerings across the value chain from CRO/CDMO for innovative and
generic APIs. The management feels synergies between the CRO and CDMO
businesses can be realized more effectively in a holding/subsidiary company
as compared to a fellow subsidiary structure.
It is engaging with consultants to resolve the import alert at the Roorkee
facility. The key issues related to clinical protocol and validation batches.
Within the CDMO segment, JP saw business worth INR2b from COVID-related
contracts in 1QFY22. It expects to execute INR1b in additional sales over the
It would be expanding its Spokane capacity by 50% to cater to demand in the
Specialty segment, which would be commercialized by CY24-end.
Financials & valuations (INR b)
2021 2022E 2023E
89.1 64.0 67.9
19.0 16.0 17.8
8.4 7.6 8.8
EBIT Margin (%)
16.4 19.6 20.5
Cons. Adj. EPS (INR) 54.1 48.8 56.2
-9.5 -9.8 15.0
EPS Gr. (%)
304.3 348.6 399.4
0.4 0.2 0.2
16.3 15.0 15.0
11.7 11.8 12.6
9.5 9.5 9.5
12.8 14.2 12.4
6.7 7.7 6.8
Div. Yield (%)
0.6 0.6 0.7
FCF Yield (%)
11.5 5.2 4.9
1.4 1.9 1.8
Low base, COVID-19, and Radiopharma drive YoY growth in earnings
Highlights from the management commentary
Shareholding pattern (%)
FII Includes depository receipts
Tushar Manudhane – Research analyst
Bharat Hegde, CFA – Research analyst
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.