Nuvama ups target on Jubilant Ingrevia, retains 'buy'; check details

A likely recovery in the agrochemicals sector, combined with early progress in the diketene business shall drive margins, according to Nuvama

Nuvama has raised its target price on Jubilant Ingrevia to Rs 849, from Rs 762 per share, along with retaining a 'Buy' rating on the stock. The brokerage firm believes the company's earnings before interest, tax, depreciation and amortisation (Ebitda) contribution from its speciality chemicals business is likely to grow from 48 per cent in FY24 to 65 per cent by FY27.

"A likely recovery in the agrochemicals sector, combined with early progress in the diketene business shall drive margins," the report stated.

Further, analysts at the brokerage expect the company to grow in the speciality chemicals segment, as it is already in advanced discussions with customers across the agrochemical, pharmaceutical and semiconductor industries regarding potential Custom Development and Manufacturing (CDMO) opportunities for long-term tie-ups.

Moreover, a likely recovery in the agrochemicals sector, combined with early progress in the diketene business shall also drive margins.

Another reason for raising the target on the stock was management's confidence in its growth plan to treble revenue and quadruple Ebitda over the next five years, according to Nuvama.

The goal for achieving 4x Ebitda in five years includes maintaining leadership in pyridine and picoline, expanding rapidly in CDMO across key regions, and scaling up non-feed B3 products in nutrition and health solutions. Also, the company's aim to sustain its lead in acetic anhydride and enhance its position in chemical intermediates will help achieve the goal, expects Nuvama.

The brokerage firm reckons the company’s initiatives in the last three years, its chemical capabilities, and existing strong relationships with customers would help it to achieve its ambitious goals.

Nuvama has raised the speciality chemical EV/Ebitda multiple to 18x from 16x, in line with the industry average while keeping 16x for nutrition and health solutions and 8x for chemical intermediates unchanged.

However, as the company's chemical intermediates business continues to witness margin pressure led by lower realisation, the brokerage has cut FY25E/26E/27E EPS by 14 per cent/21 per cent/14 per cent, respectively.

As of 10:41 AM, shares of Jubilant Ingrevia were down 1.70 per cent or Rs 12.5 at Rs 724.45 per share.