Shares of JB Chemicals hit an all-time high of Rs 2,440.05 on BSE on Tuesday as the foreign brokerage said the drugmaker should emerge among the fastest growing mid-market companies due to its focus on India and CMOs. Jefferies entered coverage of the stock with a 'Buy' rating and a share price target of Rs 2,680, suggesting upside potential of 10 per cent above the record level.
JB Chemicals is the nation's fastest growing pharmaceutical company with domain in cardiac and gastrointestinal therapies. Lifecycle management of key brands, synergistic acquisitions and targeted new launches should enable JB Chemicals to outpace industry growth, Jefferies said.
"Export growth will be led by lozenge contract manufacturing, where it has a strong customer relationship and technology," he said.
Like Torrent Pharma, Jefferies values โโJB Chemicals on an EV-Ebitda basis as the drugmaker's financials have a contribution from acquired brands that inflates depreciation and amortization.
"Our Ebitda target is in line with the non-cash ESOP charge of Rs 40 crore in FY25. Our target price is based on 20x Jun 2025 Ebitda, which has a 15% premium to Torrent Pharma due to JB Chemicals' superior Ebitda growth and ROIC profile," he said.
During fiscal year 23-26, Jefferies expects JB Chemicals to experience 12% growth in revenue, 17% growth in Ebitda, and 20% growth in earnings after tax compounded annually. Jefferies expects JB Chemicals' ROIC to expand by 700 basis points to 30 percent.
"JB Chemicals is among the top 5 global manufacturers of herbal and medicinal pills and works with a consumer/marquee pharma customer base. Most of the business is through proprietary intellectual property and not custom manufacturing At current 50 percent utilization, JB Chemicals can take on more contracts from existing customers, enter new geographies, and launch new products in the areas of immunity and digestion that should enable a revenue CAGR of 12 percent during FY23-26E to Rs 570 crore," said Jefferies.
JB Chemicals business in India focuses on four therapies cardiac (44%), gastroenterological (30%), antibiotics (10%) and gyanec (5%). a broad approach, Jefferies said.
"JB has focused on lifecycle management of key brands that make them bigger (six of JB's brands are in the top 300 brands in India), synergistic acquisitions like Azmarda for heart failure and Razel, a lipid-lowering drug, and targeted new launches, thus improving field force productivity.With this approach, we expect JB's revenue in India to witness a CAGR of 13% to Rs 2,370 crore during FY23- 26E, which is 3% above industry growth," Jefferies said.
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