The stock in Rakesh Jhunjhunwala’s portfolio, Jubilant Ingrevia (JIL), has fallen 25% so far this year amid a sharp market correction. Despite the fall in the share price, analysts remain bullish on the stock and see up to a 128% potential rally over the next 12 months. “We believe Jubilant Ingrevia is poised for transformation, with specialty chemicals catalyzing overall growth while the commodities-focused business would continue to generate strong cash. At an attractive EPS of around 15x FY24E, the downside is protected in our view,” Edelweiss Securities said in its latest report. The brokerage firm retains the buy rating for the stock with a target price of Rs 1,006, implying a potential rally of 128% in the future.
Short-term growth: being propelled by new technological platforms
According to the Edelweiss Securities report, Jubilant Ingrevia added new technology platforms in order to create complex products. “The recent addition of di-ketene chemistry further strengthens its position to capture import substitution,” he said. The company is eager to add new derivatives in the chemical bases of pyridine and di-ketene. Given the strong pull in demand, management has revised its investment forecasts for the specialty chemicals segment. With an expected capital deployment of Rs 12 billion by FY25, JIL expects to realize additional revenue of Rs 25 billion.
Long-term growth: focus on CDMO and adding capacity
Recently, the company won a CDMO project worth Rs 2.7 billion (over three years) for the manufacture of pharmaceutical intermediates for a multinational company. With growing demand for global innovators as well as new products in its pipeline, the company incurred cumulative capital expenditure of Rs 20 billion for FY22-24. “Of this amount, the specialist segment would account for the highest share: Rs 12.5 billion spread over diketene derivatives, agrochemical intermediates, open-field GMP plant for CDMO, investments in fluorination derivatives and agro-actives. Capex of Rs 2bn in nutrition and health solutions is expected to be used for product improvements as well as capacity expansion,” the Edelweiss report states.
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Ranking of shares: Buy
Target Price: Rs 1,006, Upside: 128%
Edelweiss Securities analysts believe that Jubilant Ingrevia is in a transitional phase, moving from commodity to specialty. “Its strong relationships with global leaders in the pharmaceutical and agrochemical industry and a strong tailwind in the sector would facilitate growth in the agrochemical intermediates/CDMO space. Meanwhile, the commodity chemicals business will continue to grow. support cash flow. They said. The brokerage values JIL’s specialty chemicals business at 25x FY23E EV/EBITDA and the commodities business at 10x FY23E EV/EBITDA. The brokerage retains a call to buy on the stock with a target price based on SoTP of 1,006 rupees.
According to the latest shareholding scheme, Big Bull Rajkesh Jhunjhunwala and his wife Rekha Jhunjhunwala owned 4.7% of the capital of this company as of March 31, 2022.
Brokerage Angel One expects the company to post a CAGR of 18.3% in revenue, an Ebitda of 24.3% and a CAGR of 33.9% in PAT in FY21 to 23, thanks to strong growth in the life sciences and specialty chemicals businesses. “Therefore, we believe there is value in the stock at current levels and therefore characterize it as a ‘buy’ with a price target of Rs 837,” he said.
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