Jubilant Organosys: Robust pharma show turns it on for Jubilant

HELPED by strong growth in the pharma segment, Jubilant Organosys reported 37% growth in its sales at Rs 641.6 crore for the quarter ended December 2007. Strong improvement in operating margins helped the company report 42% growth in net profit despite a spurt in interest and depreciation costs.

Jubilant had recently acquired the contract manufacturing of sterile injectables business of Hollister-Stier, which contributed Rs 81.1 crore to the topline during the quarter. This helped the company almost double its revenues from customised research and manufacturing services (CRAMS) segment to Rs 342.8 crore. As a result, the revenues from pharmaceuticals and life sciences segment jumped 74% to Rs 397.8 crore.

The scrip lost 1% to close at Rs 311.3 on BSE in a weak market when the benchmark Sensex lost 1.8% to 17,759. Despite a faster growth in staff costs, thanks to foreign acquisition, Jubilant’s operating margins improved by 540 basis points to 20.2%. This was on account of a fall in the proportion of raw material cost to net sales. Both the segments — pharma and life sciences, and industrial and performance products — registered improvement in margins.

During the quarter, Jubilant recorded highest growth in its international sales, where both regulated as well as other markets witnessed strong growth. The sales in regulated markets jumped 73% to Rs 241.6 crore while sales in other international markets increased 45.7% to Rs 104.6 crore.

The company’s interest burden rose by over 150% to Rs 12.3 crore during the quarter, thanks to higher debts. The company had outstanding debt of Rs 2,003.5 crore at the end of December 2006 quarter against Rs 1,541.4 crore a year ago. The current debt includes outstanding FCCB proceeds of Rs 1,080.1 crore.

Going forward, the company’s focus on CRAMS business is likely to bring in healthy revenue growth as the order book continues to increase. The capacity expansion at its recently acquired business of Hollister-Stier is likely to be commissioned by the end of FY2008, which will bring in additional revenue growth. The company plans to start production of new active pharmaceutical ingredients (APIs) in coming months. Similarly, the new drug delivery system (NDDS) and new drug development businesses are likely to attract larger contracts from existing as well as new customers.