Good Financials and a unique business model

• The company a good growth in their topline of 21% in the last two years. The company has also reported a very good ROE as well of 27% in FY23. The company has also consistently generated positive cash flow from operations in the last three fiscal years. However, the company’s Net profit declined in FY23 due to an increase in input costs. Despite this, the company has reported a healthy net profit margin of 22% in FY23.
• The company is a Contract development and manufacturing Organization and has a unique business model as the company manufactures contrast media intermediates, which are agents used to make medical images clearer while doing an X-RAY, a CT scan, or an MRI. There are 4 companies globally that have the majority of the market share in the contrast media business and Blue Jet supplies a critical starting intermediate to all these companies. The company also supplies sweeteners to Colgate. Such a customer base will give investors confidence for future financial expansion.
• The only concern with the company is that the technology with respect to medical equipment is constantly evolving and the company might not be able to keep its product up to date. Another concern is that the company derives 63% of its total revenue from one customer and 75% from its top 5 customers.

Fair Valuations

• The company is asking for a PE of 37.5x and a market cap-to-sales of 8x. This might seem very expensive on the face of it but the company’s ask is justified due to its unique business model. It has no comparable listed peers and we believe that the company can improve its financials going forward. Hence, we recommend subscribing to this IPO.