Sector Outlook: Positive
Domestic formulation business continues to deliver strong growth
JB Chemicals and Pharmaceuticals Ltd. reported a revenue growth of 13.0% YoY and 2.0% QoQ to Rs. 8,617 million, surpassing market expectations of Rs. 8,450 million. The domestic formulation business showed strong double-digit growth of 22.0% YoY. The company focused on its leading brands, resulting in higher volume growth and market share in core therapeutic areas. The ophthalmology portfolio transitioned smoothly in January 2024, gaining momentum. International business, excluding South Africa, grew by 15% YoY, with better business mix and cost management improving margins despite higher freight costs due to geopolitical issues. The CDMO business achieved over Rs. 1,000 million in Q4 revenue for the first time. EBITDA increased 21.1% YoY but decreased 11.2% QoQ to Rs. 1,981 million, with an EBITDA margin of 23.0%. Profit after Tax rose 44.0% YoY but fell 5.5% QoQ to Rs. 1,262 million, with a PAT margin of 14.6%. JB Chemicals outperformed the IPM with 7% YoY growth in Q4FY24.
Key Concall Highlights
Domestic Business Outlook:
JB Chemicals will continue to focus on growing its domestic market, driven by its chronic strategy. The company’s domestic business is expected to consistently outperform the market, as it emphasises expanding its major brands and integrating its recently acquired portfolio. This approach aims to ensure sustained growth and market leadership.
Chronic Portfolio:
JB Chemicals is continuing to outperform the chronic Indian Pharmaceutical Market (IPM) thanks to its key brands. By increasing the share of chronic products, the company has achieved better margins in its domestic business. JB Chemicals expects to maintain market-beating growth in India, aiming to increase the chronic product share to 60% in the mid-to-long term. This strategy focuses on strengthening its position in the chronic segment, ensuring sustained profitability and growth.
Ophthalmology Portfolio:
The ophthalmology segment of JB Chemicals showed strong growth after a smooth transition. The company is enthusiastic about its recent entry into ophthalmology, which has added some of the biggest brands to its portfolio. Total prescriptions increased from 22.2 lakh in January 2024 to 24.8 lakh in March 2024. To support this growth, the company has deployed a dedicated field force of 100 personnel to promote these brands.
Continuous Push on Cost Optimization Initiatives:
JB Chemicals aims to achieve operating margins of 25-27% despite facing inflation and market uncertainties. This is possible due to their cost optimization strategies and a favourable product mix, which have helped improve their margins.
MR Productivity:
JB Chemicals’ productivity per medical representative (PCPM) has nearly doubled over the past four years with only a small increase in the field force for its organic business. The company now has seven specialised therapy divisions with over 2,600 medical representatives working for them.
CMO Business:
In Q4FY24, the CMO and domestic formulation businesses made up 75% of JB Chemicals’ total sales. With a strong product portfolio and new products in the pipeline, the company’s CDMO business is expected to keep growing. In the medium term, the domestic and CDMO businesses are projected to account for 75-80% of total sales, up from the current 67%. The company also continues to focus on its international formulations business.
Capex Guidance:
JB Chemicals added Rs. 1,350 million in net capital expenditure for FY24 due to the expansion of their lozenges manufacturing facility in Daman. Most of the expansion costs have been covered, so only maintenance expenses are expected in FY25.
Valuation and Outlook
JB Chemicals and Pharmaceuticals reported strong revenue growth in Q4FY24, driven by the domestic formulation business, which accounted for 54% of sales. This growth was fueled by increased demand in the acquired portfolio and continued strength in the chronic segment. The ophthalmology portfolio transitioned smoothly in January 2024, gaining momentum. The international formulation business also grew, particularly in the US and Russia, although the South African tender business declined due to a strategy to improve margins. The CDMO business generated over Rs. 4,000 million in FY24. JB Chemicals plans to expand its CDMO offerings and increase its presence in ROW markets. Key brands like Cilacar, Rantac, Nicardia, and Azmarda saw improved gross margins. The company’s productivity per medical representative nearly doubled over four years, with most workforce additions focused on acquired businesses. JB Chemicals expects continued growth from geographic expansion, product launches, and improved MR productivity.
