Anand Rathi Securities is bullish on Jubilant Life Sciences and has recommended buy rating on the stock with a target of Rs 250 in its February 17, 2011 research report.
“Jubilant Life Sciences reported flat revenue (excl. the APP business) of Rs 8.7 billion mainly owing to the 32.1% decline in its life science services business. The life science products business grew 13.1% yoy, in line with our estimates.”
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“The EBITDA margin slid 580bps to 15% due to the rise in raw material costs and high SG&A expense. We believe that margins would be under pressure for the next 2-3 quarters until the services business picks up. We lower our FY11-13e revenue 2.6% owing to the subdued performance in the services business. We lower our net profit estimates for FY11-13 by 13-15% to factor in the lower margins and higher interest cost from rising interest rates.”
“We lower our target to Rs 250 based on 12x FY12e EPS (from Rs 347 based on EV/EBITDA of 10x FY12e) to factor in the lower earnings. We have changed our valuation method to a P/E-based one as the APP business has been split off and only the pharma business remains. We maintain our Buy,” says Anand Rathi Securities research report.
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