This pharma stock owned by Rakesh Jhunjhunwala plunges 7 per cent: Buying opportunity or not?

While markets continued their rally, things were different for big bull Rakesh Jhunjhunwala as few of his holdings were trading on a negative note. In fact, Jhunjhunwala’s one pharma stock witnessed hefty selling pressure and plunged by nearly 7% in one day. Jubilant Life Science was worst performer on Wednesday’s trading session in Jhunjhunwala’s portfolio. Interestingly, the ace investor had increased his holding in the same company by another 0.31% during Q3FY19 period. This brings in the question to whether one should buy Jubilant share price. 

At around 1205 hours, Jubilant share price was trading at Rs 794.20 per piece down by Rs 49.15 or 5.83% on BSE. However, the stock has also touched an intraday low of Rs 786 per piece, resulting in overall tumble of 7% on the index. Hence, making many investors poorer including Jhunjhunwala in intraday session. 

In Jubilant, Jhunjhunwala now holds about 1.88% stake with 3,000,000 equity shares which are worth Rs 252 crore currently. 

Should you buy Jubilant Life Science? 

Surajit Pal analysts at Prabhudas Lilladher said, “We cut our earnings estimates by 2.2% and 3.9% in FY20E and FY21E respectively, following assumptions of lower sales growth in US formulation. We expect that negative impact of the event as well as raising new debt capital will result in compression of PE multiples. We reduce assigned EV/EBTIDA to 7.5x (from 8.5x) on FY21E in our SOTP valuations of the company.”

Pal adds, “The current valuation reflects all possible positive developments in the near to medium term. With muted demand offtake in chemical biz (LSI), higher leverage and regulatory uncertainties, we downgrade our recommendation to ‘Reduce’ and lower TP to Rs703 (Rs822 earlier).’

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With this, it can be said that Jubilant share price is set to tumble ahead. However, considering Jhunjhunwala sees longer term picture and his holdings are massive in Jubilant, it would be keenly watched to his action in this stock in last quarter period of FY19.