Established in 1976, J.B.Chemicals & Pharmaceuticals Ltd. (JBCPL) is one of India’s fastest growing pharmaceutical companies. An integrated, research-oriented, public listed organisation with a focus on supplying affordable, quality products both in India and International markets, JBCPL is trusted by healthcare professionals globally. Today, JBCPL exports to over 30 countries across the world and earns more than half its revenue from its international business. JBCPL is widely committed to manufacturing a range of innovative specialty products that include various pharmaceutical dosage forms like tablets, injectable (vials, ampoules, form fill seal), creams & ointments, lozenges, herbal liquids and capsules. JBCPL has its headquarters in India’s financial capital, Mumbai. With a domestic sales force of 1,000 people, 17 internationally approved state of the art manufacturing units, a Research and Development Centre, and subsidiaries abroad, the organisation is continually enhancing value for its shareholders.
Domestic business to grow well:
JB chemicals has concentrated on building only few large brands in the domestic market as against spreading resources across too many small brand. JB chemical's strategy is completely different than other peers. This strategy is known as cluster strategy; where you develop your existing markets with existing products. It has market leading position in three of its four products. These top 4 products comprise around 80-90% of total revenues in India.
Focusing on Key export markets to drive business well:
JB chemical's export markets include US business, Australia, South Africa, Africa, South East Asia and other Gulf countries. As FY19 was an exceptional year for its US business (54% CC growth). So company has decided to focus on other key markets such as Russia and South Africa. JB Chemical operates through its own subsidiary in Russia and South Africa. JB Chemical has also acquired more 5-6 MNC clients for supplying Lozenges. We believe these markets to grow well in future.
API Business continue to grow steadily:
Company has signed a pact with Novartis to supply diclofenic salts in addition to diclofenic sodium. Novartis has made new registration which is subject to approval. We believe this will additionally drive the API business in near term.
Covid-19 would have a limited impact on JB Chemical. As medicines are essential items andthey have not been instructed to shut the plants. We believe there would be minimal Impact on JB Chem's export business.
High concetration risk Company's 70-80% of domestic revenues comes through its top 4 products. Discontinuation of any of these product due to regulatory issue or defect in manufacturing can impact business.
Adverse impact of regulations:
Regulations have been a biggest setback for the sector. Regulatory challenges include as delay in product approval by regulatory bodies such as US FDA.
Company is exposed to foreign currency risks as it has more than 30% revenues through exports. Any appreciation in Rupee will impact realisations
|Profit before tax||145.55||212.23||229.95||193.95||286.99||347.60||399.13||444.03|
JB Chemical has showed robust performance in India over the last 5 years. We expect this momentum to be continued in future on the back of strong market leadership position of products and new products. JB chemical is currently traded at PE of 12 which is at discount as compared to peers. We Initiate a Buy on JB Chemical on the back of robust performance, High Return ratios, Debt free position and less dependent on Global markets