Blue Jet Healthcare trades over 13% premium to issue price

Shares of Blue Jet Healthcare Ltd were trading over 13 percent higher on November 1 after its initial public offering was subscribed nearly 8 times last week.

The stock opened at Rs 359 and touched a high and a low of Rs 393 and Rs 359.90 a share on BSE. At 10.10am, the scrip was trading at Rs 392 on BSE, up 13.3 percent from its issue price of Rs 346 a share.

The Blue Jet Healthcare IPO was oversubscribed at 7.94 times, with 13.5 crore equity shares bid for in comparison to the 1.7 crore offered. High net worth individuals (HNIs) subscribed 13.59 times their quota, while qualified institutional buyers subscribed 13.72 times their portion. Retail investors’ segment was subscribed 2.22 times.

Blue Jet Healthcare is an innovative company with over two decades of experience and specialized chemistry capabilities. They have R&D labs for high-concentration contrast media products. Their strategy focuses on revenue diversification through high-margin exports. Expansion in the next 2 years and leveraging customer relationships in pharma intermediates and API categories will drive future earnings growth, analysts said.

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Blue Jet has a P/E of 34x (based on FY24E annualized EPS), which seems fully valued. However, due to its strong business prospects, good return ratios, forward integration, greenfield expansion, and positive industry outlook, many brokerages recommend a “Subscribe” rating for the medium to long term.

Blue Jet Healthcare operates a contract development and manufacturing organization (CDMO) business with specialized chemistry skills in media intermediates and sweeteners. This model enables innovation access, reduces research costs, and supports large-scale product development. It also positions them well for post-patent product supply to customers.

They plan to expand production capacity in Unit III from 213 KL to 499 KL by FY2025. They acquired a greenfield manufacturing site (Unit IV) in Ambernath in 2021, allowing for increased manufacturing capacity. Once Unit III expansion and Unit IV operations are complete, the total annual production capacity is expected to reach 1,513.6 KL by the end of FY25.

Blue Jet has a track record of sustained revenue and PAT growth at a CAGR of 20.2% and 8.6% during FY21-23, with strong RoE and ROCE of 26.6% and 31.9%, respectively, in FY23. The growth in the CDMO model, strong financial performance, and expanding production capacity are expected to drive future company performance.