JB CHEMICALS — value buy

JB Chemicals –

Q2 FY25 results and concall highlights –

Revenues – 1001 vs 882 cr, up 13 pc
Gross margins @ 66.2 pc – flat YoY
EBITDA – 285 vs 251 cr, up 13 pc ( margins flat yoy @ 28.5 pc )
PAT – 175 vs 151 cr, up 16 pc ( due reduction in finance costs from 10 cr to 2cr due sharp reduction in gross debt )

Gross Debt @ 82 cr vs 357 cr on 31 Mar
Cash on Books @ 421 cr
Capex spends for H1 FY 25 @ 49 cr

Breakdown of Q2 revenues –

Domestic formulations – 588 cr, up 22 pc ( excluding the Opthal portfolio acquired in Jan 25, YoY growth was at 12 pc vs IPM growth of 7 pc ). Domestic business now constitutes 59 pc of revenues vs 55 pc at the end of Sep 24. Cilacar, Cilacar-T, Metrogyl, Sporolac, Nicardia, Rantac, Razel – company’s leading brands continue to do well. The acquired Othalmology portfolio ( from Novartis ) grew by 19 pc – @ 57 vs 48 cr YoY. Company has a dedicated field force of 100 + MRs for this division

International formulations – 300 cr, up 14 pc. South Africa and US business registered double digit growths. Russian business grew in high single digits

CMO – 94 cr, down 19 pc – due deferment of orders from Q2 to Q3. Expect to see strong Q3 and Q4 for the CMO division

APIs – 19 cr, down 20 pc

Company’s mix of Chronic : Acute sales in domestic mkt at 48:52 vs 37:63 in Mar 19. Chronic share has been inching up year after year

Company’s 5 brands ( Cilacar, Rantac, Metrogyl, Cilacar-T, Nicardia ) feature in top 150 brands in India. Their brand wise annual sales are as follows –

Cilacar ( Anti – Hypertensive ) – 431 cr
Rantac ( Antacid ) – 359 cr
Metrogyl ( Anti-Bacterial ) – 218 cr
Cilacar -T ( Anti – Hypertensive ) – 199 cr
Nicardia ( Anti – Hypertensive ) – 189 cr

Their fast growing emerging brands include – Sporolac ( probiotic ), Azmarda ( used to treat chronic heart failure ), Razel ( used for management of dislipidemia ) and the portfolio of Ophthalmology brands acquired from Novartis ( currently generating an annual sales run rate > 200 cr ). Razel and Sporolac brands have started clocking annual sales of 90 cr and 135 cr respectively

Current MR strength @ 2300+. MR productivity @ Rs 7 lakh + per month

Company is among the top 5 Contract manufacturer of Lozenges in the world. Annual CMO sales are > 430 cr. Expected to be a high growth area

Company’s manufacturing facilities are located @ Panoli ( Gujarat ) – 03 facilities, Ankleshwar ( Gujarat ) – 01 facility and Daman – 01 facility

Excluding the Ophthalmology portfolio, Gross margins improved by 100 bps ( 1 pc ) in Q2 vs Q2 LY ( as the Opthal portfolio has structurally lower margins )

Guiding for full year EBITDA margin band of 26-28 pc for FY 25 ( FY 24 margins were at 26 pc )

Expect the CMO business to reach $ 100 million ( from $ 50 million currently ) annual run rate in 3-5 yrs timeframe. Seeing good business momentum in this segment

Azmarda continues to grow strongly. Should be able to grow this brand @ mid teen rate in the foreseeable future. Razel brand is growing at even higher rates

India business’s volume growth in Q2 was 5 pc vs flattish volume growth for IPM

Capex spends lined up for H2 @ 50-55 cr

When the company acquired Othal – branded portfolio of Novartis India, they were covering aprox 6k ophthalmologists. Company has expanded that coverage to 13k+ ophthalmologists and plan to take it to 16k+ by next FY – this is again a high growth portfolio for the company

Metrogyl franchise ( ie Metrogyl + brand extensions ) is growing in high single digits. Rantac franchise is growing in low single digits

Despite being big brands, Cilacar + Cilacar T continue to grow volumes @ 12-14 pc for last 3-4 yrs

Company has lined up a lot of new product launches ( aprox 20 products ) in the branded generics space for SA + Russia mkts – beginning Q3 next FY. This should accelerate the growth in these geographies in FY 26, 27

Continue to participate in the 2000 cr probiotics mkt with their brand – Sporolac. This is a high growth area. Expecting Sporolac franchise ( ie Sporolac + brand extensions ) to keep growing in healthy double digits

Company has lined up a couple of Injectable products and a throat spray product to be launched under their CMO division

Disc: holding, biased, not SEBI registered, not a buy/sell recommendation