Blue Jet Healthcare Ltd. shares have significant upside potential, according to brokerage firm Motilal Oswal, which has a Buy recommendation on the specialty healthcare and pharmaceutical intermediates company.
The brokerage has set a target price of ₹720 per share for Blue Jet Healthcare. Based on their assessment, the target represents almost 22% upside from the stock's reference market price.
Motilal Oswal is more optimistic about Blue Jet Healthcare’s emerging business model, diversification strategy and growth prospects in a number of healthcare-related sectors.
It has also been expanding its portfolio to decrease dependence on individual molecules and customers, and while it has been known as a pharmaceutical intermediate supplier, it is also growing its products as well.
From cardiovascular molecules to a wide range of healthcare products to support patient care in all aspects.
Blue Jet Healthcare has historically benefited from its niche position in pharmaceutical intermediates, particularly in cardiovascular therapies.
But the company is now trying to broaden its growth drivers. Its expansion strategy includes contrast media intermediates, pharmaceutical intermediates, GLP-1-related opportunities, peptide products and Contract Development and Manufacturing Organisation (CDMO) services.
This diversification is an important part of the investment thesis outlined by Motilal Oswal.
Blue Jet Healthcare should gradually transition from a company that was largely based on a relatively narrow set of products to a more diversified healthcare platform, said the brokerage.
Such diversification could also enhance the company’s growth prospects and reduce the dependency on one product category’s performance.
Pharma intermediates segment is expected to recover
Pharma Intermediates (PI) business is still an important part of Blue Jet Healthcare’s operations.
Motilal Oswal says that the segment is expected to rebound and it will be an additional growth driver for the firm.
Pharmaceutical intermediates are essential chemical compounds used during the manufacturing process of active pharmaceutical ingredients and finished medicines. Demand for these products is closely related to pharmaceutical production volumes and the introduction or expansion of drug molecules.
Recovery in the PI segment and growth from new business areas could improve Blue Jet Healthcare’s overall performance.
GLP-1 opportunity attracts attention
One of the areas attracting the interest of investors is the company’s GLP-1 ecosystem.
GLP-1-based medicines are now one of the fastest-growing areas of the global pharmaceutical industry as they are used in diabetes and weight management.
Companies involved in providing intermediates, peptides and other specialised components used in these therapies could benefit from growing global demand.
So Blue Jet Healthcare’s expansion into GLP-1 and peptide-related opportunities can be an important long-term growth pathway.
However, the scale and timing of revenue contribution from such opportunities will depend on customer development, commercialisation and broader market conditions.
Expansion into CDMO services
An important part of the company’s strategy is to grow CDMO services.
The CDMO model involves providing pharmaceutical companies with development and manufacturing capabilities. There is greater global demand for outsourcing as pharmaceutical companies look for specialized manufacturing professionals with expertise in complex chemistry and production.
Blue Jet Healthcare’s expertise in complex chemistry could serve as a basis for increasing the CDMO business.
Motilal Oswal’s positive outlook is in line with the hypothesis that these new businesses could complement the company’s already existing pharmaceutical intermediate operations.
Why is Motilal Oswal bullish?
The brokerage’s Buy call is based on the company’s transformation and its expanding addressable market.
The factors supporting the positive view include:
- Expected recovery in the pharmaceutical intermediates business.
- Diversification into contrast media intermediates.
- Opportunities linked to the growing GLP-1 market.
- Expansion into peptide-related products.
- CDMO services.
- Expertise in complex chemistry.
- Reduction of dependence on a limited number of products.
The combination of these factors could provide multiple growth avenues over the medium to long term.
₹720 target price
Motilal Oswal has recommended Buy on Blue Jet Healthcare with a ₹720 price target.
The brokerage's target suggests about 22% potential upside to the price which was used in the report.
But investors should not interpret the target as a guaranteed future price. Brokerage targets are based on assumptions about earnings, business growth, valuation and industry conditions, all of which can change.
Blue Jet Healthcare's future performance will depend on the recovery of its core business, successful execution of diversification plans, customer additions, demand for specialised pharmaceutical products and the company's ability to scale up new areas such as GLP-1, peptides and CDMO services.
Investors should therefore consider the company's financial results, valuation and risks before making any investment decision.
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