Buy Blue Jet Healthcare Ltd for the Target Rs 710 by Motilal Oswal Financial Services Ltd
Inventory normalization drives sequential pharma recovery Earnings in line
* Blue Jet Healthcare (BLUEJET) reported a revenue decline of 17% YoY to INR2.9b in 1QFY27, as pharma intermediate (PI) revenue (~41% of sales) fell 43% YoY due to the high base. This was partially offset by healthy 19%/14% YoY growth in contrast media/high-intensity sweeteners (40%/14% of total sales). The PI segment delivered an encouraging start to FY27, with sequential improvement in 1QFY27 driven by the normalization of customer inventory levels.
* Going ahead, we expect the PI segment to continue its recovery through FY27, supported by the normalization of industry-wide stocking and healthy visibility across select programs.
* Our earnings estimates for FY27/FY28 remain largely unchanged (change in EPS is due to dilution post QIP). We value the stock at 34x FY28E EPS to arrive at a TP of INR710 and reiterate BUY.
Recovery led by contrast media and high-intensity sweeteners
* BLUEJET reported revenue of INR2.9b in 1QFY27, down 17% YoY but up 25% QoQ (est. INR2.8b). High-intensity sweeteners/contrast media intermediates revenue grew 14%/19% YoY to INR397m/INR1.1b, while PI revenue declined 43% YoY to INR1.2b.
* On a QoQ basis, PI revenue grew to INR1.2b from INR24m in 4QFY26, and high-intensity sweeteners reported a revenue growth of 8%. This was partially offset by a ~40% decline in Contrast Media Intermediates to INR1.2b.
* Gross margin stood at 53.2% (+480bp YoY, -320bp QoQ).
* As a percentage of sales, employee costs stood at ~7% (vs. ~5% in 1QFY26), while other expenses stood at ~13% (vs. ~1% in 1QFY26).
* EBITDA stood at INR981m (est. INR970m), down 19% YoY/up 38% QoQ. EBITDA margin was 33.5% (-60bp YoY, +310bp QoQ).
* Adj. PAT stood at INR783m (down 14% YoY, up 22% QoQ), in line with our estimate of INR771m
Valuation and view
* We anticipate the recovery in PI to continue, led by the end of destocking, a strong orderbook and visibility on four chronic therapy products. Further, growth is likely to be supported by strong momentum in contrast media through new product launches and the initiation of pilot activities for a new highintensity sweetener.
* Further, ongoing investments in Vizag, Hyderabad, and CDMO capabilities are expected to support the company’s next phase of commercialization-led growth.
* We expect a CAGR of 19%/28%/25% in revenue/EBITDA/PAT over FY26-28. Our earnings estimates for FY27/FY28 remain largely unchanged (change in EPS is due to dilution post QIP). We value the stock at 34x FY28E EPS to arrive at a TP of INR710 and reiterate BUY.
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