Rakesh Jhunjhunwala Portfolio: Shares of Jubilant Pharmova Ltd. have plunged 55 per cent from their 52-week high levels and dropped over 13 per cent in the past one month. The pharma company also reported a weak set of quarterly numbers with margins taking a hit due to pricing pressures in the US market.
Jubilant Pharmova Limited reported total income of Rs. 1524.57 crores during the period ended March 31, 2022 as against Rs. 1316.44 crore during the period ended December 31, 2021. The company posted a net profit of Rs. 59.55 crores for the period ended March 31, 2022 as against net profit / (loss) of Rs. 50.99 crores for the period ended December 31, 2021.
The Board of Directors of Jubilant Pharmova Ltd has, at its meeting held on May 27, 2022, also recommended a dividend of Rs. 5 (Rupees Five only) per equity share of Re. 1 each for the year ended March 31, 2022.
Big Bull of the Indian market, Rakesh Jhunjhunwala holds 10,770,000 equity shares, aggregating to 6.8 per cent stake in the company. It is also one of the stocks in which the billionaire investor marginally raised his position from 6.3 per cent in December, 2021 quarter to 6.8 per cent in March 2022.
As per the latest corporate shareholdings, Rakesh Jhunjhunwala and Associates publicly holds 34 stocks in the quarter ended March 2022. The net worth of these stocks has been estimated to be over Rs 29,660.1 crore as on May 30, by stock analysis platform trendlyne.com.
What Should Investors Do?
Analysts said near to medium-term growth would remain under pressure due to regulatory issues, slow recovery in the API business and inflated costs, but felt the recent correction on the counter has made valuations reasonable. They have price targets that suggest flat to 30 per cent potential upside on the counter.
Motilal Oswal Securities finds the stock worth Rs 430, at 7 times EV/Ebitda, as it sees flat earnings growth for FY23.
Among the key segments, generics sales fell 29 per cent YoY and accounted for 14 per cent of sales for the quarter. The import alert at its Roorkee site, pricing pressure in the US, and lower Remdesivir sales impacted its performance in generics, Motilal Oswal said.
Meanwhile, another brokerage firm, ICICI Securities, upgraded the stock to ‘Add’ from ‘hold’. It feels recent correction in the past six months make the stock a good bargain. “Recent correction in the price makes valuations reasonable. Hence, we upgrade the stock to ADD from Hold with a revised TP of Rs447/share (earlier: Rs 550/share),” it said.
Near term drivers are weak, Nirmal Bang Institutional Equities, while suggesting a couple of medium to long term business drivers including reorganisation of API and drug discovery businesses into a single entity should help the company build a larger scale. The reorganisation is expected to be completed in July.
“In the long term, we see the ongoing capacity expansion (US$92mn investment) in the CMO business adding value post FY24. The generics business can recover once the import order on the Roorkee facility is lifted. Radiopharma can surprise on the upside in the medium term, led by their efforts in building an innovative pipeline. The most near term target is MIBG, which is being evaluated in Phase 2/3 trials,” Nirmal Bang said while suggesting a target of Rs 532 on the counter.
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