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Blue Jet Healthcare Ltd (BJHL) is a specialty pharmaceutical and healthcare ingredients and intermediates company, offering niche products targeted toward innovator pharmaceutical companies and multi-national generic pharmaceutical companies. Since its incorporation in 1968, they have established a contract development and manufacturing organization business model, they have competencies and manufacturing capabilities in contrast media intermediates and high-intensity sweeteners, including saccharin and its salts.

Details of the Issue:

The issue size consists of offer for sale worth Rs. 840cr. The promoters i.e. ‘Akshay Bansarilal Arora and Shiven Akshay Arora’ to offload jointly 2.16cr number of shares.

Investment Rationale:

* Large manufacturer of contrast media intermediates in India

* Presence in niche categories with high barriers to entry

* Long-standing relationships and multi-year contracts with multi-national customers

* Leveraging long-standing customer relationships to continue entering adjacencies in the pharma intermediate and API category

* Strong product development and process optimization capabilities with a focus on sustainability

Valuation and Recommendation:

BJHL has a strong track record of overall performance with healthy growth of in topline at 10% CAGR between FY20-23 and 24% growth in Q1FY24 on yoy basis. In terms of operating performance, it has delivered strong margins of more than 35% except in FY23 where it reported 30.4% of EBITDA margin due to increase in raw material prices and employee expenses. However, it has observed improvement in Q1FY24 on account of softening in raw material prices and other expenses. As there are no listed entities having similar business of that BJHL, we are not able to compare it with exact peers. However, we have done peer comparison with the set of companies having strong financials in pharmaceutical industry. Company’s ROE and ROCE for FY23 stood at 23.5% and 32.0% are slightly better compared with the average rate of peer performance of 23.3% and 30.2%, respectively. The issue is valued PE valuation of 33.9x based on Q1FY24 annualized EPS which appears reasonable when compared with an average valuation of selected peers of 34.3x. Thus, we recommend SUBSCRIBE to the issue.

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SEBI Registration number is INH000001766