Buy Jubilant Ingrevia, target price Rs 860: Prabhudas Lilladher

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Buy Jubilant Ingrevia, target price Rs 860:  Prabhudas Lilladher


Prabhudas Lilladher has buy call on with a target price of Rs 860. The current market price of Jubilant Ingrevia is Rs 475.7.

Jubilant Ingrevia, incorporated in the year 2019, is a small cap company (having a market cap of Rs 7637.53 Crore) operating in Chemicals sector.

It’s key products/revenue segments include other operating revenue and sale of services for the year ended March 31, 2021.




Financials

For the quarter ended June 30, 2022, the company has reported a consolidated total income of Rs 1175.90 crore, down 9.89 per cent from last quarter total income of Rs 1304.94 crore and up 2.20 per cent from last year same quarter total income of Rs 1150.54 crore. Company has reported net profit after tax of Rs 79.38 crore in latest quarter.

The company’s top management includes Mr.Shyam S Bhartia, Mr.Priyavrat Bhartia, Ms.Ameeta Chatterjee, Mr.Siraj Azmat Chaudhry, Mr.Pradeep Banerjee, Mr.Arun Seth, Mr.Sushil Kumar Roongta, Ms.Sudha Pillai, Mr.Anant Pande, Mr.Rajesh Kumar Srivastava, Mr.Hari S Bhartia, Mr.Arjun Shanker Bhartia. Company has Walker Chandiok & Co. LLP as its auditors. As on June 30, 2022, the company has a total of 16 crore shares outstanding.

Investment Rationale

The brokerage initiates coverage on Jubilant Ingrevia (JUBLINGR) with ‘BUY’ rating at SOTP based TP of Rs 860 (implied 13x Sep’24 EV/EBITDA and 22x Sep’24PE).

With an expertise in 35 technology platforms (incl. Ammoxidation, Grignard, Halogenation Ketene/Diketene & others), JUBLINGR is steadily expanding its product portfolio by leveraging several business synergies.

EBITDA contribution from higher value segments (SPCM + NHS) is expected to increase to ~67% by FY25Efrom ~53% in FY22, as SPCM/NHS EBITDA grow at ~27%/11% CAGR over FY22-25E.

The brokerage believes JUBLINGR is well placed to capitalize on long term growth opportunities given

(1) 60 new products pipeline

(2) strong traction in CDMO

(3) import substitution

(4) China+1 policy adopted by global clients and

(5) commensurate capex outlay of Rs20.5bn over FY22-25 (of which Rs9bn is committed).

CI segment (commoditised business) is expected to witness muted EBITDA CAGR of 1% over FY22-25E on realisation and margin normalisation (from elevated base of FY22).

Yet strong balance sheet (Net Debt/Equity at 0.1x) despite ~Rs18bn cash outflow on capex over FY23-25E, and earnings mix improvement led by higher value and structural growth segments will drive rerating in the stock. Initiate ‘BUY’.

Promoter/FII Holdings
Promoters held 51.47 per cent stake in the company as of June 30, 2022, while FIIs owned 10.19 per cent, DIIs 0.7 per cent.

(Disclaimer: Recommendations given in this section or any reports attached herein are authored by an external party. Views expressed are that of the respective authors/entities. These do not represent the views of Economic Times (ET). ET does not guarantee, vouch for, endorse any of its contents and hereby disclaims all warranties, express or implied, relating to the same. Please consult your financial adviser and seek independent advice.



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