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Healthy order visibility supports growth; input costs weigh on margins Operating performance above our estimate

* Blue Jet Healthcare (BLUEJET) reported revenue growth of 2.3x YoY and 28% QoQ, driven by strong growth in pharma intermediates (PI) and contrast media intermediates. PI revenue (~49% of sales) rose 4.2x YoY, while contrast media intermediates revenue (~39% of sales) grew 80% YoY. This was partially offset by a 19% YoY decline in high-intensity sweeteners (7% of sales).

* Going ahead, we expect BLUEJET’s growth to be supported by a strong PI order book, the ramp-up of commercial central nervous system (CNS) and oncology products, and steady demand in contrast media. Price increases with select customers from 3QFY27 should aid margin recovery, while Mahad’s commissioning in 2HFY27 should strengthen backward integration and cost competitiveness.

* We largely retain our FY27E/FY28E earnings despite the significant beat in 2Q, as we tone down our 2HFY27 gross margin assumption (from +350bp YoY to flat), reflecting higher crude prices than last year. We value the stock at 35x FY28E EPS to arrive at a TP of INR710. Reiterate BUY

Highlights from the management commentary

* Guidance and margin outlook: Healthy order visibility across contrast media and PI supports the 2HFY27 outlook, although shipment timing and product mix may drive quarterly fluctuations. Price increases with select customers from 3QFY27 should partly offset higher raw-material, reagent, and solvent costs. Sequential margin recovery will depend on input-price stability and the extent of cost pass-through.

* Contrast media and forward integration: Existing production volumes remain steady, while forward integration into iodinated intermediates should meaningfully improve realizations and margins. Mahad’s key starting material (KSM) facility remains on track for commissioning in 2H, strengthening backward integration and supply security. A new contrast media intermediate was delivered and validated for an innovator, although the underlying molecule remains in late-stage clinical development.

* Peptides and R&D: BLUEJET is entering the peptides business through building blocks and fragments, with further integration dependent on customer requirements. Supplies for the new innovator program remain at the trial/validation stage. The Hyderabad R&D center is operational with ~50 scientists and plans to install ~100 fume hoods across two phases, expanding capabilities across complex chemistry platforms.

Valuation and view

* We believe BLUEJET is well placed to sustain growth as its PI portfolio expands and integration in the contrast media segment deepens. Profitability should gradually improve as revised customer pricing offsets part of the input-cost pressure and commissioning at Mahad strengthens cost competitiveness.

* We expect a CAGR of 22%/28%/25% in revenue/EBITDA/PAT over FY26-28. We value the stock at 35x FY28E EPS to arrive at a TP of INR710. Reiterate BUY.

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