Neutral on Jubilant Lifesciences - Motilal Oswal

Jubilant Lifesciences (JOL IN; Mkt Cap USD0.7b, CMP Rs185, Neutral)

The company's 3QFY11 top-line was flat at Rs8.65b, EBITDA declined by 40.9% YoY to Rs1.3b and adjusted PAT declined by 56.2% YoY.

The life science products business' revenue grew 13% YoY to Rs7b led by volume growth of 17% YoY.

EBITDA declined by 40.9% YoY to Rs1.3b due to an adverse revenue mix leading to suboptimal cost absorption and EBITDA margins were 15%.

Adjusted PAT declined by 56.2% YoY to Rs441m led by poor operational performance and higher tax expenses.

We believe the de-merger of the APP business is a positive step, as it reflects the management's intention to adopt a focused approach for the PLSPS business. The de-merger will also lead to improvement in Jubilant's RoCE. Based on revised estimates, the stock trades at 12.8x FY11E EPS, 12.2x FY12E EPS and 8.6x FY13E EPS. Our estimates take into account increased interest costs. Maintain Neutral.

Source : Equity Bulls

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