JB Chemicals’ Growth Drivers Intact, Jefferies Says; Keeps Buy, Lifts Target

Global brokerage Jefferies reiterated Buy rating on JB Chemicals & Pharmaceuticals Ltd. and raised its target price slightly, saying the company recorded a small beat in 4QFY24 results and its growth drivers are intact.

The company’s 4QFY24 total revenue of 8.62 billion rupees (+13% YoY) and EBITDA of 1.98 billion rupees (+21% YoY) beat the brokerage’s estimates by 5%, while net profit of 1.26 billion (+44% YoY) was 15% ahead, Jefferies said in an investor note.

The brokerage said the domestic business, including the acquired ophthal portfolio, grew 22% YoY (13% organic growth), which was better than expected. EBITDA margin stood at 23% (in-line), up 150 basis points YoY, it added.

The management expects India sales to achieve high-teens growth in FY25, while the organic growth to be in the 12%-14% range, Jefferies said, adding that the company expects key brands to continue to gain volume share and new launch to contribute 3% of sales growth.

For the contract development and manufacturing organization (CDMO) business, JB Chemicals expects high-teens growth in 2HFY25, led by new market contributions like the European Union and potential entry in the US toward the end of FY25, it said.

Jefferies also said the management increased its FY25 EBITDA margin guidance range by 1% to 26%-28%, with an increasing share of the chronic portfolio to India sales and efficiency program like productivity improvement being key levers of margin improvement.

While the ophthal portfolio will be a drag on gross margins, operating leverage from the core business, including ophthal and better margins in the international business, will help overall margin improvement, it added.

“We maintain our Buy rating on the stock on strong execution capabilities, possibilities of positive surprise from CDMO in the medium term, and ability to undertake M&A,” Equity Analyst Alok Dalal and Equity Associate Dhawal Khut said in the note.

Jefferies raised its base case target price on JB Chemicals to 2,060 rupees from 2,000 rupees per share. Based on its upside scenario assumptions, the brokerage has a target price of 2,290 rupees on the stock.

JB Chemicals closed at 1,773.60 rupees on the National Stock Exchange in Mumbai trading yesterday.

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