Jubilant Organosys - Long Term Stock Pick
Jubilant Organosys is an integrated pharmaceutical industry player, one of the largest Custom Research and Manufacturing Services(CRAMS) and Drug Discovery and Development Services (DDDS) companies out of India.
Jubilant Organosys is the largest company in CRAMS sector in India and the largest company in Pyridines in the world.
Business, Products and Services of Jubilant Organosys
Jubilant Organosys operates in two main segments - Pharmaceuticals and Life Sciences Products and Services and Industrial and Performance Products. Each segment has independent growth units with clear performance and growth objectives.
These businesses offer products and services to meet the demands of the Pharmaceuticals, Agrochemicals, Construction, Food & Beverages, Textile, Tyres and Paper & Packaging industries.
Jubilant Organosys is a worldwide leader in distinct product segments including selective APIs, Pyridine and its derivatives, Solid Polyvinyl Acetate, Vinyl Pyridine Latex and Organic intermediates such as Ethyl Acetate, Acetic Anhydride and Acetaldehyde
Jubilant Organosys has successfully positioned itself as a preferred outsourcing partner for leading global pharma & life sciences companies and has the capability to deliver products and services across the pharma value chain. Jubilant has geographically diversified manufacturing facilities at ten locations worldwide. Together, these help the Company cater to over 150 customers across 50 countries.
Price Targets
| Year | Fair P/E | EPS | Bear Target | Normal Target | Bull Target |
| FY 2009-10 | 15 | 23 | 265 | 360 | 410 |
| FY 2010-11 | 16 | 30 | 365 | 470 | 535 |
| FY 2011-12 | 17 | 37 | 465 | 570 | 755 |
Why should we invest in Jubilant Organosys?
- Jubiliant Organosys is the only CRAM player that reported growth (10%) in Q3
of FY2009. Analysits project more growth from CRAMS from next financial year
onwards (esp. from Q2 FY2010 onwards) - Jubiliant Organosys made significant investments in the last few years whose
benefits will be realized in the coming years and helps its growth. - Jubiliant Organosys recently delivered a cancer drug molecule for Eli Lilly
and is currently in Clinical Trails. If that succeeds, company can command good
valuations. - Jubiliant Organosys is well positioned to take up pharma outsourcing deals
because of its strong alliances with many pharma companies. Pharma outsource
in general is expected to grow in the coming years. - Jubiliant Organosys posted nearly 300% growth in EPS in this financial year.
Company posted over 280 crores in profits against a loss of arounf 140 crore
in the first three quarters of FY2009. - Jubiliant Organosys is trying to create to new listed companies as part fo
its restructuring plan. This will the company to be more focussed in their core
strenghts. - Jubiliant Organosys is demerging agri-polymer business to ficus on Pharma nd
Life Sciences business.
Risk Factors
- Jubiliant Organosys reduced profit guidence by 5% for FY2010 due to some contracts problems.
- Jubiliant Organosys is prone to economic uncertainities.
- High Debt/Equity ratio.
- CRAMS business itself is not posting high growth so far (though expectation for the future are high).
Verdict
Jubiliant Organosys is strictly for patient long term investors with moderate risk apitite. Company has the potential to give around 65% returns in 2 years in normal market conditions.
I am not responsible for your investment decisions. Shown below are just the views of the author based on his understanding and research.
