WOW - Broker Rap - ENAM - Jubiliant Organosys

In its report dated 26th December, 2006 ENAM India Research (ENAM) initiates a neutral coverage on Jubilant Organosys (Jubilant) with CMP of Rs 230 and a target price of Rs241.

ENAM India Research (Enam) states that Jubilant is an integrated player in Pharma & Life Sciences, Industrial chemicals, Performance chemicals, and is a total solutions provider for CRAMS.

ENAM quotes that future growth will be driven by the higher margin Pharma & Life sciences business which is backed by capex of Rs500cr from FY07E to FY08E. ENAM points out that dependence on the molasses-based Industrial chemicals businesses will fall while the Performance chemicals arm may be divested.

ENAM says that Sales and PAT expected to grow at 3-yr CAGR of 22% and 46% respectively. ENAM anticipates that EBIDTA margin expected to increase from 14.3% in FY06 to 18.8% in FY08E.

ENAM makes us aware that sum of parts valuation for Jubilant is Rs241 per share, based on 18x Pharma business and 8x Industrial and Performance chemicals business for FY08E EPS. ENAM throws ligth on the facts that at CMP (Rs230), Jubilant trades at 19.9x FY07E EPS of Rs11.6 and at 15.1x FY08E EPS of Rs15.2. ENAM initiates a coverage with a sector Neutral rating.

Thanks HK