The outlook for the Pharmaceuticals and Life Science Ingredient (LSI) segments remains positive.
The outlook for the Pharmaceuticals and Life Science Ingredient (LSI) segments remains positive. Within Pharmaceuticals, we believe specialty pharma remains on a strong footing, led by superior execution in the radio-pharma, allergy and CMO businesses. LSI segment is expected to deliver a robust performance, driven by better demand and a favourable price environment. We roll forward our price target to Rs 957 (on an SOTP basis) from Rs 861. We re-iterate our Buy rating on the stock.
Radio-pharma, allergy and CMO businesses driving growth in Pharmaceuticals: We expect specialty pharma to grow at a 16% CAGR (adjusting for Triad business) over FY17-20.
Reduced supply from Chinese competitors to aid growth in LSI: In the LSI segment, the business scenario has improved for specialty intermediates and nutritional products due to lower supply from Chinese competitors.Outlook: We expect JLS to deliver a CAGR of 17% in revenue to Rs 93 bn, 14% in Ebitda to Rs 19.8 bn and 20% in PAT to Rs 10 bn over FY17-20e. We are positive on JLS due to (i) superior growth in specialty pharmaceuticals and LSI, (ii) improved profitability due to better operating margin/lower interest outgo and (iii) attractive valuation.