Rakesh Jhunjhunwala portfolio stock Jubilant Ingrevia (JIL) has tanked 25% so far this year amid steep market correction. Despite the plunge in share price, analysts remain bullish on the stock and see up to 128% potential rally in the next 12 months. “We believe Jubilant Ingrevia is on the cusp of a transformation with specialty chemicals catalysing overall growth while commodity-led business would keep churning strong cash. At an attractive ~15x FY24E EPS, downside is protected in our view,” Edelweiss Securities said in its latest report. The brokerage firm retains buy rating on the stock with a target price of Rs 1,006, implying 128% potential rally going forward.
Near-term growth: To be powered by new technology platforms
According to the Edelweiss Securities report, Jubilant Ingrevia has added newer technological platforms in order to create complex products. “The recent addition of di-ketene chemistry further strengthens its position to capture import replacement,” it said. The company is looking forward to adding newer derivative products across both pyridine and di-ketene chemistry bases. Given strong traction in demand, the management has revised its capex guidance for the specialty chemicals segment. With expected capital deployment of Rs 12bn by FY25, JIL expects to achieve additional revenue of Rs 25bn.
Long-term growth: Focus on CDMO and capacity addition
Recently, the company was awarded a CDMO project worth Rs 2.7bn (spanning three years) for manufacturing pharmaceutical intermediates for an MNC. With growing demand from global innovators as well as new products in its pipeline, the company has committed cumulative capex of Rs 20bn for FY22–24. “Of this, the specialty segment would account for the highest share—Rs 12.5bn spread over diketene derivatives, agrochemical intermediates, green-field GMP plant for CDMO, investment across fluorination derivatives and agro-actives. Capex of Rs 2bn in Nutrition and Health Solutions is expected to be utilised to enhance products as well as for capacity expansion,” the Edelweiss report stated.
Stock rating: Buy
Target price: Rs 1,006, Upside: 128%
Edelweiss Securities analysts believe Jubilant Ingrevia is in a transitory phase, moving from commodity to speciality. “Its solid relationships with global pharma and agrochemical leaders and a strong sector tailwind would facilitate growth in agrochemical intermediates/CDMO space. Meanwhile, the commodity chemicals business shall continue to support cash flows.” they said. The brokerage values JIL’s specialty chemicals business at 25x FY23E EV/EBITDA and commodity business at 10x FY23E EV/EBITDA. The brokerage retains buy call on the stock with an SoTP-based target price of Rs 1,006.
According to the latest shareholding pattern, Big Bull Rajkesh Jhunjhunwala and his wife Rekha Jhunjhunwala held 4.7 per cent stake in this company as of 31 March 2022.
Brokerage firm Angel One expects the company to post 18.3% CAGR in revenues, 24.3% in Ebitda and 33.9% CAGR in PAT over FY21-FY23, driven by strong growth in life science chemical and specialty chemical business. “Therefore, we believe that there is value in the stock at current levels and hence rate it a ‘buy’ with a price target of Rs 837,” it said.
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