nd jubilant life sciences limited… · purchase of stock in trade 794.20 611.80 30% excise duty on...

Document code: FOTL_220120186_3 Copyright © 2016 Firstobject Technologies Ltd. All rights reserved

JUBILANT LIFE SCIENCES LIMITEDResult Update (CONSOLIDATED BASIS): Q3 FY18

CMP: 897.30 JAN 22nd, 2018

Overweight ISIN:INE700A01033

Index DetailsSYNOPSIS

Jubilant Life Sciences Ltd is an integrated globalpharmaceutical and life sciences companyengaged in Pharmaceuticals, Life ScienceIngredients and Drug Discovery Solutions.

The company achieved a consolidated turnover ofRs. 20677.60 mn for Q3 FY18 as against Rs.14916.40 mn Q3 FY17, an increase of 38.62%.

Pharmaceuticals revenue at Rs. 11007.30 mncontributing 53% to the revenues, up 41% YoYand 28% QoQ.

Life Science Ingredients revenue at Rs. 9257.40mn, contributing 45% to the revenues, up 46%YoY and 25% QoQ.

During the quarter, consolidated EBIDTA stoodat Rs. 4200.60 mn as against Rs. 3369.40 mn inthe corresponding period of the previous year.

During the quarter, consolidated PBT stood at Rs.2611.80 as against Rs. 1661.00 mn in Q3 FY17.

During the quarter, consolidated net profit stoodat Rs. 2125.40 mn as against Rs. 1194.00 mn inthe corresponding quarter ending of previousyear.

EPS of the company stood at Rs. 13.65 in Q3FY18 against Rs. 7.67 in the correspondingquarter of the previous year.

Finance costs lower 22% YoY at Rs. 770 mnfrom Rs. 980 mn in Q3 FY17.

The Company has a total of 974 filings acrossgeographies including 895 filings in Dosage(Orals) and 79 filings in Injectables.

Net sales and Operating Profit of the company areexpected to grow at a CAGR of 10% and 23%over 2016 to 2019E, respectively.

Stock DataSector PharmaceuticalsBSE Code 530019Face Value 1.0052wk. High / Low (Rs.) 974.50/600.00Volume (2wk. Avg.) 232000Market Cap (Rs. in mn.) 139709.61

Annual Estimated Results(A*: Actual / E*: Estimated)Years (Rs. in mn) FY17A FY18E FY19ENet Sales 60063.20 74728.62 84443.35EBITDA 13701.50 15077.04 16778.47Net Profit 5756.50 6873.42 8017.17EPS 36.97 44.15 51.49P/E 24.27 20.33 17.43

Shareholding Pattern (%)

As on Dec 2017 As on Sep 2017

Promoter 54.02 54.02

Public 43.77 43.75

Others 2.21 2.23

1 Year Comparative Graph

JUBILANT LIFE SCIENCES LIMITED S&P BSE SENSEX

PEER GROUPS CMP MARKET CAP EPS(TTM) P/E (X)(TTM) P/BV(X) DIVIDENDCompany Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)Jubilant Life Sciences Ltd 897.30 139709.61 40.99 21.89 4.07 300.00Natco Pharma Ltd 1014.85 176896.30 29.81 34.04 11.31 300.00Divi's Laboratories Ltd 1095.50 290820.80 34.31 31.93 5.38 500.00Shilpa Medicare Ltd 587.65 47909.30 14.13 41.59 5.24 60.00


QUARTERLY HIGHLIGHTS (CONSOLIDATED BASIS)

Results update- Q3 FY18,

(Rs. in million) Dec-17 Dec-16 % Change

Revenue 20677.60 14916.40 38.62%

Net Profit 2125.40 1194.00 78.01%

EPS 13.65 7.67 78.01%

EBIDTA 4200.60 3369.40 24.67%

Jubilant Life Sciences Limited has achieved a turnover of Rs. 20677.60 million for the 3rd quarter of the FY 2017-18 as

against Rs. 14916.40 million in the corresponding quarter of the previous year, an increase of 38.62%. During the 3rd

quarter, net profit stood at Rs. 2125.40 million against Rs. 1194.00 million in the corresponding quarter ending of

previous year. Reported earnings per share of the company stood at Rs. 13.65 in Q3 FY18 as against Rs. 7.67 in the

corresponding quarter of the previous year. Profit before interest, depreciation and tax stood at Rs. 4200.60 million as

against Rs. 3369.40 million in the corresponding period of the previous year.

Break up of Expenditure

Break up ofExpenditure

Value in Rs. Million

Q3 FY18 Q3 FY17 %Change

Cost of MaterialsConsumed 7828.50 4672.10 68%

Purchase of stock inTrade 794.20 611.80 30%

Excise duty on sales 0.00 334.20 --

Employee benefitsexpenses 4229.30 3091.60 37%

Depreciation andamortization expenses 818.20 726.50 13%

Power and Fuelexpenses 1196.90 828.00 45%

Others 3215.00 2448.50 31%


Segment Revenue

Q3 FY18 Highlights:

Consolidated revenue at Rs. 20677.60 mn, up 39% YoY and 26% QoQ

Pharmaceuticals revenue at Rs. 11007.30 mn contributing 53% to the revenues, up 41% YoY and 28% QoQ

Life Science Ingredients revenue at Rs. 9257.40 mn, contributing 45% to the revenues, up 46% YoY and 25% QoQ

Drug Discovery Solutions revenue at Rs. 448.50 mn, contributing 2% to the revenues, up 2% YoY and 2% QoQ

International revenues at Rs. 14820 mn, contributing 72% to the revenues; growing 40% YoY

Finance costs lower 22% YoY at Rs. 770 mn from Rs. 980 mn in Q3 FY17 and higher 17% QoQ from Rs. 660mn in Q2

FY18.

Finance costs include borrowing costs of Rs. 570 mn as against Rs. 890 mn in Q3 FY17 and Rs. 560 mn in Q2 FY18 and

charge on Stock Settlement Instrument of Rs. 200 mn as against Rs. 100 mn each in Q3’FY17 and Q2’FY18.

Net Debt reduction of Rs. 1590 mn after incurring capex of Rs. 700mn

Key Highlights

Rubyfill installation completed in three sites in the USA during Q3’FY18

Received approval for Drax Exametazime during the year; Expect to launch in FY19

Received USFDA approval for new pulmonary indication in Draximage DTPA in Q3’FY18


Ramp up of CMO business underway with strong order book of US$ 693 Million and addition of three new clients

during the year

Increasing Lyophilization capacities due to increased demand in both CMO and Allergy Therapy Products

businesses

Joint inspection of the API facility was completed by USFDA and Health Canada during the quarter. Received a

compliant rating from Health Canada

Completed capacity addition in the API plant to meet higher demand going forward

Increasing capacity in Solid Dosage Formulations to be completed in FY19 to meet increasing requirements in EU,

ROW and US markets

Portfolio of R&D products – Filings and Approvals

The Company has a total of 974 filings across geographies including 895 filings in Dosage (Orals) and 79 filings in

Injectables. Of this, 736 filings (663 Dosage (Orals) and 73 injectables) have been approved while 238 filings (232

Dosage (Orals) and 6 injectables) are pending approval.

COMPANY PROFILE

Jubilant Life Sciences Ltd is an integrated global pharmaceutical and life sciences company engaged in Pharmaceuticals,

Life Science Ingredients and Drug Discovery Solutions. The Pharmaceuticals segment, through its wholly owned

subsidiary Jubilant Pharma Limited, is engaged in manufacture and supply of APIs, Solid Dosage Formulations,

Radiopharmaceuticals, Allergy Therapy Products and Contract Manufacturing of Sterile and Non-sterile products through

6 USFDA approved manufacturing facilities in India, USA and Canada. The Life Science Ingredients segment is engaged

in Specialty Intermediates, Nutritional Products and Life Science Chemicals through 5 manufacturing facilities in India.

The Drug Discovery Solutions segment, provides proprietary in-house innovation & collaborative research and

partnership for out-licensing through 3 world class research centres in India and USA. Jubilant Life Sciences Limited has

a team of around 6,600 multicultural people across the globe and is committed to deliver value to its customers across

over 100 countries. The Company is well recognized as a ‘Partner of Choice’ by leading pharmaceuticals and life sciences

companies globally.


FINANCIAL HIGHLIGHT (CONSOLIDATED BASIS) (A*- Actual, E* -Estimations & Rs. In Millions)Balance Sheet as of March 31st, 2016 –2019E

FY16A FY17A FY18E FY19EASSETS1) Non-Current Assets

a) Property, plant and equipment 31147.00 31040.40 32282.02 33896.12b) Capital Work in Progress 1469.20 2106.50 3517.86 4608.39c) Goodwill 18311.00 17622.30 19384.53 20644.52d) Other Intangible assets 1586.10 2404.60 3654.99 4678.39e) Intangible assets under developmenmt 4644.00 4731.30 4565.70 4839.65f) Financial assets

i) Investments 854.30 1027.10 965.47 1033.06ii) Loans 142.00 119.30 181.34 239.36iii) Other financial assets 0.50 9.90 12.18 14.37

g) Deferred tax assets (net) 844.70 1419.00 1631.85 1925.58h) Income tax assets 460.90 257.30 200.69 186.65i) Other non-current assets(net) 28.70 187.60 195.10 212.66Sub - Total Non- Current assets 59488.40 60925.30 66591.73 72278.75

2) Current Assetsa) Inventories 12031.00 12204.00 12509.10 12946.92b) Financial assets

i) Trade receivables 9505.00 10053.10 9550.45 9980.22ii) Cash and bank equivalents 3392.70 4564.40 4062.32 4224.81

iii) Bank balances 53.20 31.90 54.87 63.65iv) Loans 49.60 72.40 84.71 98.26v) Other current financial assets 533.00 308.10 591.55 798.60

c) Income tax assets(net) 1088.20 43.50 45.89 50.48d) Other current assets 2100.60 2203.80 3349.78 4421.70Sub - Total current assets 28753.30 29481.20 30248.66 32584.63

Total Assets (1+2) 88241.70 90406.50 96840.39 104863.38EQUITY AND LIABILITIES1) EQUITY

a) Equity Share Capital 155.40 155.70 155.70 155.70b) Other equity 29507.10 34204.70 41078.12 49095.29c) Non- controlling interest -381.30 -392.90 -408.62 220.50

Total Equity 29281.20 33967.50 40825.21 49471.492) Non Current Liabilities

a) Financial liabilitiesi) Borrowings 30132.10 35050.30 31895.77 28706.20ii) Other financial liabilities 1364.70 1861.20 2140.38 2375.82

b) Provisions 703.10 806.90 984.42 1132.08c) Deferred tax liabilities (Net) 1990.30 1864.00 1677.60 1476.29d) Other non -current liabilities 125.90 97.20 92.34 85.88Sub - Total Non Current liabilities 34316.10 39679.60 36790.51 33776.26

3) Current Liabilitiesa) Financial liabilities

i) Borrowings 7489.70 2556.00 3016.08 3468.49ii) Trade payables 6121.10 7494.90 8966.78 10042.79iii) Other financial liabilities 8726.40 4843.50 5570.03 6403.97

b) Other Current liabilities 787.90 883.50 777.48 738.61c) Provisions 316.30 357.90 382.95 404.40d) Current tax liabilities 1203.00 623.60 511.35 557.37Sub - Total current liabilities 24644.40 16759.40 19224.67 21615.63

Total Equity and Liabilities (1+2+3) 88241.70 90406.50 96840.39 104863.38


Annual Profit & Loss Statement for the period of 2016 to 2019E

Value(Rs.in.mn) FY16A FY17A FY18E FY19E

Description 12m 12m 12m 12mNet Sales 58933.10 60063.20 74728.62 84443.35Other Income 133.70 248.60 207.26 227.58Total Income 59066.80 60311.80 74935.89 84670.92Expenditure -46463.70 -46610.30 -59858.84 -67892.45Operating Profit 12603.10 13701.50 15077.04 16778.47Interest -3713.50 -3411.10 -2850.07 -2679.07Gross profit 8889.60 10290.40 12226.97 14099.41Depreciation -3467.50 -2914.00 -3216.76 -3458.01Profit Before Tax 5422.10 7376.40 9010.22 10641.39Tax -1554.00 -1630.20 -2192.36 -2660.35Profit After Tax 3868.10 5746.20 6817.85 7981.04Minority Interest 50.10 10.30 55.57 36.12Net Profit 3918.20 5756.50 6873.42 8017.17Equity capital 155.40 155.70 155.70 155.70Reserves 29507.10 34204.70 41078.12 49095.29Face value 1.00 1.00 1.00 1.00EPS 25.21 36.97 44.15 51.49

Quarterly Profit & Loss Statement for the period of 30th Jun, 2017 to 31st Mar, 2018E

Value(Rs.in.mn) 30-Jun-17 30-Sep-17 31-Dec-17 31-Mar-18EDescription 3m 3m 3m 3mNet sales 15960.50 16420.40 20677.60 21670.12Other income 68.10 70.90 32.20 36.06Total Income 16028.60 16491.30 20709.80 21706.19Expenditure -12584.40 -13359.80 -16509.20 -17405.44Operating profit 3444.20 3131.50 4200.60 4300.74Interest -687.30 -660.10 -770.60 -732.07Gross profit 2756.90 2471.40 3430.00 3568.67Depreciation -724.80 -790.10 -818.20 -883.66Profit Before Tax 2032.10 1681.30 2611.80 2685.02Tax -595.00 -426.60 -483.40 -687.36Profit After Tax 1437.10 1254.70 2128.40 1997.65Minority Interest 34.30 27.90 -3.00 -3.63Net Profit 1471.40 1282.60 2125.40 1994.02Equity capital 155.70 155.70 155.70 155.70Face value 1.00 1.00 1.00 1.00EPS 9.45 8.24 13.65 12.81


Ratio Analysis

Particulars FY16A FY17A FY18E FY19E

EPS (Rs.) 25.21 36.97 44.15 51.49

EBITDA Margin (%) 21.39% 22.81% 20.18% 19.87%

PBT Margin (%) 9.20% 12.28% 12.06% 12.60%

PAT Margin (%) 6.56% 9.57% 9.12% 9.45%

P/E Ratio (x) 35.59 24.27 20.33 17.43

ROE (%) 13.04% 16.72% 16.53% 16.20%

ROCE (%) 23.88% 23.09% 24.02% 24.85%

Debt Equity Ratio 1.27 1.09 0.85 0.65

EV/EBITDA (x) 13.78 12.61 11.31 9.99

Book Value (Rs.) 190.88 220.68 264.83 316.32

P/BV 4.70 4.07 3.39 2.84

Charts


OUTLOOK AND CONCLUSION

At the current market price of Rs. 897.30, the stock P/E ratio is at 20.33 x FY18E and 17.43 x FY19E respectively.

Earning per share (EPS) of the company for the earnings for FY18E and FY19E is seen at Rs. 44.15 and Rs.51.49

respectively.

Net sales and Operating Profit of the company is expected to grow at a CAGR of 10% and 23% over 2016 to 2019E.

On the basis of EV/EBITDA, the stock trades at 11.31 x for FY18E and 9.99 x for FY19E.

Price to Book Value of the stock is expected to be at 3.39 x and 2.84 x for FY18E and FY19E respectively.

Hence, we say that, we are Overweight in this particular scrip for Medium to Long term investment.

INDUSTRY OVERVIEW

The Indian pharmaceuticals market is the third largest in terms of volume and thirteenth largest in terms of value. India is

the largest provider of generic drugs globally with the Indian generics accounting for 20 per cent of global exports in

terms of volume.

India enjoys an important position in the global pharmaceuticals sector. The country also has a large pool of scientists and

engineers who have the potential to steer the industry ahead to an even higher level. Presently over 80 per cent of the

antiretroviral drugs used globally to combat AIDS (Acquired Immuno Deficiency Syndrome) are supplied by Indian

pharmaceutical firms.

The Indian pharma industry, which is expected to grow over 15 per cent per annum between 2015 and 2020, will

outperform the global pharma industry, which is set to grow at an annual rate of 5 per cent between the same period.


Branded generics dominate the pharmaceuticals market, constituting nearly 80 per cent of the market share (in terms of

revenues).

India has also maintained its lead over China in pharmaceutical exports with a year-on-year growth of 11.44 per cent to

US$ 12.91 billion in FY 2015-16, according to data from the Ministry of Commerce and Industry. Imports of

pharmaceutical products rose marginally by 0.80 per cent year-on-year to US$ 1,641.15 million.

Overall drug approvals given by the US Food and Drug Administration (USFDA) to Indian companies have nearly

doubled to 201 in FY 2015-16 from 109 in FY 2014-15. The country accounts for around 30 per cent (by volume) and

about 10 per cent (value) in the US$ 70-80 billion US generics market.

India's biotechnology industry comprising bio-pharmaceuticals, bio-services, bio-agriculture, bio-industry and

bioinformatics is expected grow at an average growth rate of around 30 per cent a year and reach US$ 100 billion by

2025. Biopharma, comprising vaccines, therapeutics and diagnostics, is the largest sub-sector contributing nearly 62 per

cent of the total revenues at Rs 12,600 crore (US$ 1.88 billion).

The Union Cabinet has given its nod for the amendment of the existing Foreign Direct Investment (FDI) policy in the

pharmaceutical sector in order to allow FDI up to 100 per cent under the automatic route for manufacturing of medical

devices subject to certain conditions.

The drugs and pharmaceuticals sector attracted cumulative FDI inflows worth US$ 13.85 billion between April 2000 and

March 2016, according to data released by the Department of Industrial Policy and Promotion (DIPP).

The Government of India unveiled 'Pharma Vision 2020' aimed at making India a global leader in end-to-end drug

manufacture. Approval time for new facilities has been reduced to boost investments. Further, the government introduced

mechanisms such as the Drug Price Control Order and the National Pharmaceutical Pricing Authority to deal with the

issue of affordability and availability of medicines.

Road Ahead

The Indian pharmaceutical market size is expected to grow to US$ 100 billion by 2025, driven by increasing consumer

spending, rapid urbanisation, and raising healthcare insurance among others.

Going forward, better growth in domestic sales would also depend on the ability of companies to align their product

portfolio towards chronic therapies for diseases such as such as cardiovascular, anti-diabetes, anti-depressants and anti-

cancers that are on the rise.

The Indian government has taken many steps to reduce costs and bring down healthcare expenses. Speedy introduction of

generic drugs into the market has remained in focus and is expected to benefit the Indian pharmaceutical companies. In

addition, the thrust on rural health programmes, lifesaving drugs and preventive vaccines also augurs well for the

pharmaceutical companies.


Disclosure Section

The information and opinions in Firstcall Research was prepared by our analysts and it does not constitute an offer orsolicitation for the purchase or sale of any financial instrument including any companies scrips or this is not an officialconfirmation of any transaction. The information contained herein is from publicly available secondary sources and dataor other secondary sources believed to be reliable but we do not represent that it is accurate or complete and it should notbe relied on as such. Firstcall Research or any of its affiliates shall not be in any way responsible for any loss or damagethat may arise to any person from any inadvertent error in the information contained in this report. Firstcall Research and/or its affiliates and/or employees will not be liable for the recipients’ investment decision based on this document.

Analyst Certification

The following analysts hereby state that their views about the companies and sectors are on best effort basis to the best oftheir knowledge. Unless otherwise stated, the individuals listed on the cover page of this report are research analysts. Theanalyst qualifications, sectors covered and their exposure if any are tabulated hereunder:

Name of the Analyst Qualifications SectorsCovered

Exposure/Interest tocompany/sector UnderCoverage in the CurrentReport

Dr.C.V.S.L. Kameswari M.Sc, PGDCA,M.B.A,Ph.D (Finance)

Pharma &Diversified

No Interest/ Exposure

U. Janaki Rao M.B.A CapitalGoods


B. Anil Kumar M.B.A Auto, IT &FMCG


M. Vijay M.B.A Diversified No Interest/ ExposureV. Harini Priya M.B.A Diversified No Interest/ ExposureMD. Naveed M.B.A Diversified No Interest/ ExposureA. Bhikshapathi M.B.A Diversified No Interest/ Exposure

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An investor's decision to buy or sell should depend on individual circumstances (such as the investor's own discretion, hisability of understanding the dynamics, existing holdings) and other considerations.

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Overweight (O): The stock's total return is expected to exceed the average total return of the analyst's industry (orindustry team's) coverage universe, on a risk-adjusted basis, over the next 12-18 months.

Equal-weight (E): The stock's total return is expected to be in line with the average total return of the analyst's industry(or industry team's) coverage universe, on a risk-adjusted basis, over the next 12-18 months.

No-weight (NR): Currently the analyst does not have adequate conviction about the stock's total return relative to theaverage total return of the analyst's industry (or industry team's) coverage universe, on a risk-adjusted basis, over the next12-18 months.

Underweight (U): The stock's total return is expected to be below the average total return of the analyst's industry (orindustry team's) coverage universe, on a risk-adjusted basis, over the next 12-18 months.

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