Jubilant Life Sciences - March 2013 Results Preview - Motilal Oswal

- We expect healthy 13.4% YoY growth in Jubilant Organosys' (JOL) top line to INR13.28b in 4QFY13E, mainly driven by both life sciences and pharma division.

- EBITDA would grow 24% YoY to INR2.25b; EBITDA margin is likely to expand 150bp YoY on a low base to 17%.

- Adjusted PAT would be INR915m, compared to INR476m in 4QFY12. We estimate high PAT growth to be driven by higher other income (due to amortization related forex loss of INR400m in 4QFY12) and lower taxes.

We expect JOL to record 17% top line CAGR, 20% EBITDA CAGR and 41% EPS CAGR (on a low base) over FY12-15E. EPS CAGR will be much higher than EBITDA CAGR as the company had reported a large forex loss of INR1.6b in FY12. High debt (net debt was INR35.5b as at end-December 2012) continues to be our main concern area. We believe JOL needs to restructure its balance sheet significantly for its stock to get re-rated. We also believe that some of its past acquisitions (like Draxis) have been made at expensive valuations, resulting in extended payback periods and lower return ratios. High debt and low RoCE (12-16%) remain the overhangs. The stock trades at 5.1x FY14E and 4.4x FY15E EPS. Neutral.

Source : Equity Bulls

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