Entry into high growing opthal segment
JB Chemical’s (JBCP) has entered into Trade Mark License agreement with Novartis Innovative Therapies AG, beginning Jan’27, for a portfolio of 10 opthalmic brands in Indian market. Initially the company will in-license all 10 brands (generic in nature) from Novartis for a period of 3 years starting Dec’23 for Rs 1.25bn and later acquire all 10 brands for a consideration of $116mn (Rs 9.64bn) payable on or before 31st Dec26. JBCP holds Rs 26bn worth of highly profitable sales (70% of total sales; including Novartis brands). In the near term we expect this acquisition to dilute return ratios, however, will be EPS neutral in year 1 and gets entry into highly growing opthal segment.
JBCP’s long term growth drivers remain intact led by 1) geographical expansion of legacy brands 2) improvement in MR productivity 3) scale-up in acquired portfolio 4) launch of new products & therapies 5) rise of contract manufacturing business and 6) improvement in FCF generation. Our FY24/25E EPS stands broadly remains unchanged. We expect EPS CAGR of 29% over FY23-26E. At CMP, the stock is trading at 27x FY26E P/E adjusted for ESOP and amortization charges. We maintain ‘BUY’ rating with revised TP of Rs1,800/share (Rs1,675 earlier) as we roll forward, valuing at 30x FY26E EPS adjusted for ESOP and amortization charges.
