Jhunjhunwala is bullish on Jubilant Pharmova
last week, the share price of Jubilant Pharmova jumped over 6% in two days on the news that ace investor Rakesh Jhunjhunwala had picked up a fresh net stake of 0.3% in it. it hit an intra-week high of ₹639 before closing the week at ₹622, having touched a lifetime-low of ₹585 per scrip on Tuesday.
now that it’s in the spotlight, let’s take a look at the business and whether it’s worth the hype.
Jubilant Pharmova is the pharmaceuticals business of Jubilant Life Sciences which was spun off in February. despite the demerger, it reported a revenue of ₹1,634.65 crore in the quarter ended June 30, 2021 compared to ₹1,156.07 crore in the same period a year ago. its net profit stood at ₹160.49 crore for the quarter, as against ₹35.39 crore for the year-ago period.
furthermore, the company’s debt stood at ₹28,300 crore at the end of March 2021, significantly down from ₹48,100 crore a year earlier. its net debt is just 1.3 times its EBITDA, which is an excellent figure for a company of its size (market cap of ~₹1 lakh crore). however, the reason for the stock’s slide is because its EBITDA has fallen around 10% over the past year. but it is possible that the Big Bull smells a revival of sorts when it comes to this company, which is why he has decided to increase his holding in the company. before this trade, Jhunjhunwala held a ~6% stake in the firm. the company also places an emphasis on research, particularly in the field of oncological and auto-immune diseases. any successful breakthrough in the field would be extremely rewarding.
but it is also a good time to look at the sector as a whole. currently, the NSE Pharma index is sitting on 7% gains this year compared to 19% for the benchmark Nifty. this is due to a sharp correction in many of the sector’s stocks post the declaration of Q1 FY22 results. not that they have been poor, but that the wild bull run in the stock market demands that companies deliver stellar performances every quarter. anything less is likely to be punished.
a potential third wave of Covid-19 in India may put pressure on supply chains and raw materials, driving up costs. but during a pandemic, a pharmaceutical stock is always bound to be of great interest, especially if it has superstars believing in it.