JB Chemicals Q3 Results Review - Domestic Business, CMO To Drive Future Growth: Nirmal Bang

Nirmal Bang Report

JB Chemicals and Pharmaceuticals Ltd.’s Q3 FY24 performance was a mixed bag. Revenue missed our estimate due to lower-than-expected growth in the domestic and custom manufacturing organisation businesses. However, Ebitda margin was better than estimate on the back of softening raw material costs, lower ESOP cost and a better product mix.

Revenue grew by ~7% YoY, led by double-digit growth in Domestic Formulations, largely supported by the Chronic segment and the acquired Pediatric portfolio. Ebitda margin guidance has been maintained at 25-27% (Ex-ESOPs) with bias towards the higher end of the range.

JB Chemicals remains our preferred pick within pharma, mainly underpinned by aggressive growth focus in the domestic plus CMO business, high return ratios, lean balance sheet and healthy free cash flow despite acquisitions. In the domestic market, it continues to outpace industry growth with life cycle management of legacy brands and new launches.

Also, strong performance of the acquired businesses is boosting overall domestic growth. Recently, the company has entered into the Ophthalmology segment with an agreement with Novartis. Growth in margin-accretive CMO business is also expected to remain strong on the back of geographical expansion and product diversification.

We maintain 'Buy' on JB Chemicals with a revised target price of Rs 2,053, valuing it at 23 times Dec-25E enterprise value/Ebitda.

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