JB Chemicals & Pharmaceuticals Ltd Quarterly Results Q3 FY 25 stock analysis

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Sector Outlook: Positive

Domestic formulation & CDMO continues to deliver strong growth

JB Chemicals and Pharmaceuticals Ltd. reported a 14.1% yearly revenue growth but a 3.7% drop from the previous quarter, reaching Rs. 9,635 million. The domestic business performed well, growing 12% compared to the market’s 8%, driven by strong sales of major brands. Internationally, the CDMO division led growth, but sales declined in the US and Russia, while South Africa’s Branded Generics segment performed well. The company has a strong order pipeline, supporting future growth. EBITDA rose 14.1% YoY but fell 5.9% QoQ to Rs. 2,545 million, with margins at 26.4%. Gross margins improved, excluding the ophthalmology segment, due to cost optimization, a better product mix, and price growth. Profit after tax was Rs. 1,625 million, up 21.7% YoY but down 6.9% QoQ, with a PAT margin of 16.9%. The company aims to become one of India’s top 10 in prescription count by expanding its core brands, launching new products, and pursuing acquisitions, particularly strengthening its position in the cardiac segment.

Key Concall Highlights

Domestic Business Outlook: JB Chemicals aims to keep growing in India, focusing on chronic therapies. Its progressive portfolio now makes up 65% of domestic sales, up from 35% in FY20. The company targets mid-teen growth with 6-7% volume growth, better efficiency, and more high-margin products. While open to acquisitions, it mainly focuses on expanding its existing brands for long-term growth.
Ophthalmology Portfolio: The company’s eye-care business is growing fast due to higher prescriptions and market reach. After acquiring a new portfolio, it doubled its coverage of eye doctors from 7,000 to 14,000-15,000 and expanded its field team from 65 to 110 members. JB Chemicals sees strong long-term potential in this segment.
MR Productivity: The company focuses on improving medical representative (MR) efficiency without adding staff. It has seven therapy divisions and over 2,300 MRs. No new hiring is planned in the next 12-15 months, with efforts centered on productivity improvements.
Cost Optimization: JB Chemicals expects to maintain operating margins of 26-28% despite inflation and market challenges by cutting costs and improving its product mix.
Azmarda: This brand is seeing strong growth, with 15,000–20,000 new units added monthly. Competition from low-cost generics has reduced, leaving only four to five key players in the market.
Metrogyl: Rising gastrointestinal infections boosted Metrogyl’s growth in the first nine months of FY25. The company expects 5-6% yearly growth and higher single-digit growth if seasonal demand is strong.
Sporlac: JB Chemicals plans to expand its Sporlac brand with new products, including liquid Sporlac, Sporlac CG (for dental health), and Sporlac for women’s health in the coming months.
CMO Business: The company expects steady growth in Q4FY25 with a strong order pipeline. Over the next 18-24 months, it plans four to five major global projects and is investing in its Daman and Panoli facilities. It has also expanded in Europe, supplying lozenges in the Czech Republic and partnering with Kenvue. The CDMO segment is expected to grow at a mid-teen rate, contributing significantly to overall revenue growth.

Valuation and Outlook

JB Chemicals & Pharmaceuticals Ltd. is showing strong growth, with its domestic business contributing 60% of sales and expanding steadily. The company has successfully grown its chronic portfolio, which is performing better than the Indian Pharma Market (IPM). Its India business continues to lead growth, driven by chronic therapies and a strong acute segment. Internationally, the CDMO segment is the main driver, with a strong order pipeline ensuring steady performance in the medium term. JB Chemicals has maintained its quarterly growth rate while improving operating margins, expected to stay between 26%-28% due to better product mix and efficiency efforts. While open to acquisitions, the company mainly focuses on growing its existing brands. Despite short-term challenges like currency fluctuations and raw material costs, JB Chemicals is well-positioned for continued growth through expanding legacy brands, international business momentum, better MR productivity, contract manufacturing growth, smooth integration of its ophthalmology portfolio, improved operations, and new product launches.