Within Pharmaceuticals, we believe specialty pharma would continue driving growth, led by better traction from recent launches as well as existing products.
Within Pharmaceuticals, we believe specialty pharma would continue driving growth, led by better traction from recent launches as well as existing products. In radiopharmaceuticals, while JLS continues enjoying better traction in existing products, the marketing effort for new products is expected to add to growth in CY18. The renewed focus on the allergy business has helped the company to outperform industry growth and expand its market share. Strong order book in CMO provides sufficient business visibility for the next 4-5 years. We expect specialty pharma to grow at a 16% CAGR (adjusting for Triad business) over FY17- 20. Deferment of some business from 1HFY18 would aid growth in 2HFY18 for the API business.
In the LSI segment, the business scenario has improved for specialty intermediates and nutritional products due to lower supply from Chinese competitors as a result of production restrictions imposed by the Chinese government to reduce pollution. Even the life science chemical segment has been showing better traction, led by increasing business exposure to the ex-China market.
We expect JLS to deliver a CAGR of 17% in revenue (including Triad revenue from 2QFY18) to Rs 9,300 crore, 14% in EBITDA to Rs 1,980 crore and 20% in PAT to Rs 1,000 crore over FY17-20. 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. We value JLS on an SOTP basis (11x EV/EBITDA for pharma and 4.5x LSI business). We increase our price target (12M forward earnings) to Rs 957 and re-iterate Buy.
In a move that could potentially reverse the ARPU accretion trend (4-5 price hikes taken over the last nine months), RJio (according to media reports) cut ARPU by 10- 25% (Rs 50-60) for its four most popular price plans Rs 149/28 days, Rs 349/70 days, Rs 399/84days and Rs 449/91days.