PICK OF THE WEEK:

Jupiter Bioscience Ltd (JBL)

BSE Code: 524826

CMP: Rs.105.30 (and later it was recommended at Rs.92-93-94)

Book Value: Rs.200.85

EPS: Rs.19.75

P/E: 5.33

Industry P/E: 23.59

Market Cap: Rs.169.89

Dividend: 20%

52 Week H/L: Rs.149/73.60

Introduction: The Company was established in 1985 by Mr. K.S.Sarma a technocrat of repute and a respected entrepreneur in the Indian pharmaceutical industry. Jupiter Bioscience Limited is one of the few companies in the world to have competency in synthesis of peptides starting from the basic stage to finished peptides. JBL ranks among global top 10 players in the peptide chemistry and the only one in India with a distinction of integrated model of peptide pharmaceuticals. The company’s product portfolio further includes specialty and fine chemicals, drug intermediates, bulk drugs and nutraceuticals. With expertise on multiple technology platforms and processes based on advanced organic chemistry, chiral chemistry, peptide chemistry and biotechnology the company is geared to provide solutions for the global pharmaceutical and the biotechnology industry.

Shareholding Pattern: The promoters hold 17.88%, while the public holding is 82.12%. Among the public DIIs hold 1.72%, while FIIs hold 0.045. Angel Broking Ltd holds 1.23% of the shares of the company.

Financials: On a standalone basis, for FY10, the total income of the company came out to be Rs.184 Cr as against Rs.142.79 Cr in the same period previous year. The PBDT of the company inspite of higher interest came out to be Rs.72.49 Cr as against Rs.53.52 Cr in the same period previous year. The profit before tax of the company inspite of higher interest and depreciation came out to be Rs.37.28 Cr as against Rs.36.39 Cr in the same period previous year. The net profit of the company for FY10 came out to be Rs.30.82 Cr as against Rs.31.98 Cr in the same period previous year. This is on a very small equity capital of Rs.16.13 Cr. The reserves of the company as of 31^st March, 2010, stood at a healthy figure of Rs.307.90. However, though the OPM remained flat, the NPM dipped considerably when comparing on Q-o-Q basis. On consolidated basis, EPS of the company for FY10 came out to be whooping Rs.23.22.

For Q1FY10, the total income of the company came out to be Rs.51.37 Cr as against Rs.33.52 Cr in the same period previous year. The PBDT of the company for Q1FY10 came out to be Rs.19.15 Cr as against Rs.13.35 Cr in the same period previous year. The profit before tax for Q1FY10 came out to be Rs.10.08 Cr as against Rs.8.27 Cr in the same period previous year. The net profit of the company for Q1FY10 increased by around 14% to Rs.8.37 Cr, as against Rs.7.34 Cr, in the same period previous year. The EPS of the company for June, 2010 quarter alone came out to be Rs.5.19 as against Rs.4.55 in the same period previous year. The OPM of the company came out to be Rs.51.20% in Q1FY10 as against 55.68% in Q1FY09. The NPM also fell to 16.31% as against 21.94% in the same period previous year, which is of some concern.

Triggers:

• The Company is focused at providing high cost effective standardized peptides and peptide building blocks and also developed a peptide Library which can support customers for their project.
• Moreover, the company is also expanding its business and technological focus on non-peptide generic drug and intermediates based on organic and chiral chemistry by adding products to its existing list. The manufacturing operations in USA are being set up to focus on solid phase peptide synthesis while the operations in Switzerland are directed towards building capabilities on solution phase synthesis. The manufacturing facilities in India will focus on manufacturing the reagents and the building blocks. Manufacture of generic peptide and non–peptide APIs for the un-regulated market has commenced in 2009.
• The company is continuing to add capacity and extend its product range to meet the growing market demands. The company proposes to manufacture a range of fast moving non-peptide generics ranging from proton pump inhibitors, anti-allergy, anti-depressant, anti-AIDS segments, and antibiotics. It has developed cost effective processes for the products. It has also added the products in the veterinary API segment especially anti- helmentics.
• The company has marketing offices in USA, Switzerland and Japan. The Company has established representative offices and business development offices in Germany, Singapore, Middle East, Denmark and Spain. The company has started to expand marketing and business development operations in the following countries viz. Latin America, Central America, Malaysia, UK, France and Korea. The above initiative will definitely result in higher foreign exchange earnings in the coming years.
• Its subsidiary company Sven Genetech Limited has already made rapid strides in synthesis of specialty peptides, launch of new formulations and development of its capabilities in the diagnostics and enzymes areas. Sven Genetech Limited proposes to enter new business segments in the coming years, these include: (i) Formulations–Oncology (ii) Biopharmaceuticals (iii) Biosimilars (iv) Enzymes, (v) Neutraceutical APIs. During FY10, the Company approved to disinvest its stake through offer of sale of shares as per the resolution passed in the Extraordinary General Meeting held on 09th December, 2009, for achieving a strategic advantage to both the companies, while the Company would benefit out of the disinvestments, the subsidiary could access the capital market for its long-term resources.
• The Company’s 100% subsidiary in USA, Jupiter Bioscience Inc. is gearing up for manufacture of custom peptides and generic peptide APIs by the solid phase peptide synthesis. The company is also currently discussing with major contract manufacturing companies in USA and Europe to discuss business opportunities covering the entire expertise of Jupiter. The company has initiated business development effort of contract research business.
• Jupiter Bioscience Ltd earlier informed BSE that a meeting of the Board of Directors of the Company will be held on August 24, 2010, inter-alia, to consider the following offer, issue and allotment of the securities of the Company on Preferential basis, pursuant to the approval of the members of the Company obtained at the Annual General Meeting held on August 09, 2010, subject to the in-principle approval of the Stock Exchange and such other approvals as may be required in this connection.
• Jupiter Bioscience Ltd earlier concluded the placement of 11, 30,000 Global Depository Receipts at US$ 19 per Global Depository Receipt (Representing 1, 13, 00,000 equity shares of Rs.10 each) amounting to U5$ 21.47 million. Accordingly, the Board has approved and allotted 11, 30,000 Global Depository Receipts underlying 1, 13, 00,000 equity shares of Rs.10 each representing the said GDR's. The company proposes to utilize the GDR issue proceeds basically for the following purposes: (i) Setting up/acquisition of new manufacturing facilities (ii) Up-gradation/Modernization of existing manufacturing facilities (iii) Investment in subsidiaries, (iv) Augmenting long term working capital needs, (iv) Part retirement of high cost debt, (v) To meet the capital requirements of ongoing research and process development, etc.

Chart Check and Conclusion: The Company introduced a range of new products in the peptide business, the last fiscal, the significant one being the launch of pseudoproline peptides which are spurring the growth of the peptide synthesis industry. The Company is consistently working towards improving the yields in its manufacturing processes. During the last year, the focus was also directed towards improving the yields and process optimization for manufacturing many of the existing products which have provided it significant savings in its manufacturing costs.

Now from the charts it has been found that the stock could be purchased above Rs.104.50, for a target of Rs.173, in the medium to long term. Please keep a SL of Rs.97 for any short term trade. The other chartical parameters are more or less in the buy mode. Hence considering the above, it would be safe to buy the stock for short to medium term perspective. In the short term the stock could touch Rs.120—125, if the bullish trend continues.

Disclaimer: Though due care has been taken while preparing this report but no responsibility will be assumed by the author for the consequences what so ever, resulting out of acting on these recommendations or after reading the report.

The calls made herein are for informational purposes and are not recommendations to any person to buy or sell any securities. The information is derived from sources that are deemed to be reliable but its accuracy and completeness are not guaranteed. The author does not accept any liability for the use of this column for buying and selling of securities. Readers of this column who buy or sell securities based on the information in this column are solely responsible for their actions. The author, his acquaintances, his company or his family members may or may not have positions in the Scrips mentioned in this column. Investors should take their own decisions while buying and selling the shares/securities.

Note: This scrip was recommended to the Paid Groups on 20-09-10, after which the scrip made a high of Rs.106.40. The stock was again recommended to the Paid Groups at Rs.92-93-94.