Bhartia brothers wealthier by Rs 60 bn as stocks rally on improved profits

Shyam S Bhartia and Hari S Bhartia, the brothers who manage the Jubilant Bhartia group, are indeed jubilant. After a rough patch, the two main businesses of the group — pharma (Jubilant Life Sciences) and foods (Jubilant FoodWorks) — are making a strong comeback. 

Jubilant Life Sciences, the bigger of the two businesses, posted its best quarterly profit of Rs 2.13 billion in the December quarter, up 78 per cent year-on-year (YoY). The consolidated revenue for the quarter expanded by 42 per cent to a record Rs 20.68 billion. Both profit and revenue were above analyst estimates. The firm has also reduced its debt by Rs 1.59 billion during the quarter to Rs 36 billion. 

“We are happy to report record growth in both revenues and profits. The company has reported highest revenue and profitability driven by our specialty pharma — injectable business and our life science ingredients segment. We continue to reduce debt through internal cash generation for a strong balance sheet,” Chairman Shyam S Bhartia and co-Chairman and Managing Director Hari S Bhartia said. 

Jubilant Life Sciences’ scrip hit a high of Rs 974 a day after the results, on January 18. The scrip is up 52 per cent since October and closed at Rs 912.50 on Wednesday. Brokerages have revised their target price upwards on the stock while advising clients to buy the share. Motilal Oswal has set a target price of Rs 1,110 on the share. “We raise our FY18, FY19 and FY20 earnings estimates by 8.2 per cent, 13.8 per cent and 13 per cent, respectively, to factor in strong Q3 FY18 performance,” the brokerage said. ICICI Direct has a target price of Rs 1,090 on the company.

Jubilant FoodWorks, which runs 1,127 franchisees of Domino’s, reported a 231 per cent growth in profit during the quarter. Profit stood at Rs 660 million. Revenue for the three-month period increased 21 per cent to Rs 7.95 billion. The top line also reflected in the operating profit margins, which expanded 750 basis points over the year-ago quarter to 17.2 per cent. Its scrip continued to rally after the results and hit a high of Rs 2,329 on January 23.  

A Citi Research report said: “With our earlier concerns of high pizza prices and product quality getting addressed, we see a sharp turn in consumer footfalls and order growth.” Profitability improvement should be stronger. Dunkin losses should come down further, coupled with cost initiatives and more sensible discounting, it said. Citi changed its earlier recommendation of ‘sell’ on the stock to ‘buy’ and has put a target price of Rs 2,500.  

The gains in the stock price have left the brothers wealthier. The value of promoters’ shareholding in Jubilant Life Sciences (with their stake of 54.02 per cent) stands at Rs 78.51 billion (based on Wednesday’s closing price of Rs 912.50 and m-cap of Rs 145.34 billion). The gains have been 47 per cent since January 2017. The promoters’ 44.94 per cent stake in Jubilant FoodWorks is now worth Rs 60.24 billion, up 140 per cent since January 2017.

The value of promoters’ total shareholding in these two companies is now Rs 138.75 billion and has appreciated 77 per cent since January 2017.