A potent fusion
JB Pharma offers a healthy cocktail of a robust domestic franchise, niche CMO presence and measured exports strategy, aided by peerless execution. Having primarily grown organically until FY2022 and later on aided by benefits from acquired brands, JB has handsomely outperformed the IPM in the past decade by ~600 bps and currently ranks 22 in the IPM. Backed by improved MR productivity in India amid a healthy CMO order book and steady exports traction, we expect strong 17%/19% EBITDA/PAT CAGRs over FY2024-27E for JB. We initiate coverage on JB with BUY and FV of Rs2,025 (36X Sep 2026E EPS), implying a 15% upside to CMP.
Initiate with BUY; FV at Rs2,025 provides 15% upside to CMP
We initiate coverage on JB with a BUY rating and FV of Rs2,025/share, based on 36X Sep 2026E EPS—a slight premium to Mankind, but a discount to TRP’s implied domestic P/E multiple. We expect JB to trade at a premium to other domestic-focused companies, owing to its (1) leading market share across its legacy brand families, (2) imminent ramp-up of the acquired portfolios, (3) robust CMO traction, (4) lesser exposure to the US, EU and other regulated markets and (5) unparalleled execution track record. While the stock has had a phenomenal run over the past five years (up 10X), we believe current valuations of 21X FY2026E EV/EBITDA and 33X FY2026E P/E are yet to fully encapsulate the growth potential of the business. We believe the 16% 10-year overall EBITDA CAGR implied by our reverse DCF model (Exhibit 5) capture the company’s potential success in the domestic and CMO segments.
Focused efforts in India and CMO to propel earnings further
JB is the 22nd largest player in the IPM (used to hold the 32nd rank three years ago), with a strong franchise in therapies such as cardiac, gastrointestinal and antiparasitic. While the five deals since FY2022 have propelled reported domestic sales, our analysis of IQVIA data (Exhibit 45) suggests JB has also demonstrated a solid ~19% CAGR in its base portfolio over FY2020-24. Aided by strong brands driving higher MR productivity, we bake in a robust ~13% organic domestic sales CAGR over FY2024-27E. We expect the high-margin CMO vertical to double by FY2028E, led by a healthy order book and enhanced capacity. Overall, we forecast a 14% sales CAGR and 17% EBITDA CAGR for JB over FY2024-27E. We expect a 230 bps expansion in JB’s EBITDA margins over FY2024-27E, driven by higher domestic productivity and higher branded/CMO mix, despite factoring in compression due to the Novartis deal. In the absence of any meaningful capex, we expect JB to generate cumulative FCF of Rs13.4 bn over FY2024-27E, with healthy 21.1% RoAE and 24.8% RoIC in FY2027E
Key risks—any senior management exits, NDMA issues and sales concentration Any senior management exits (ESOP policy is critical [see Exhibit 71]), resurfacing of NDMA concerns relating to Rantac, high domestic sales concentration and aggressive amortization policy of the acquired brands are some key risks for JB
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