IGI Logo

Solid quarter; success story to continue

JB Pharma (JBCP) reported solid results for 2QFY25, with Revenue/EBITDA/PAT growing 13.5%/11%/16% YoY respectively. The India segment led the performance, posting a 22% YoY growth (in line), while export formulations grew by 14% YoY (5% beat). However, both the CDMO and API segments saw decline of 17%/18% YoY respectively. Management guided for a recovery in the CDMO segment in 2HFY25 (20%+ growth) as some sales got deferred to 3Q. Domestic business grew 12% YoY ex-acquisition, driven by 6%/5% price and volume growth respectively. Domestic formulations are expected to maintain above market growth, supported by both legacy products and the recently acquired ophthal portfolio. Notably, brands such as Cilacar, Cilacar-T and Nicardia continue their impressive performance growing 20%/31%/16% YoY as of MAT Sep’24. We remain positive on JBCP due to its evolving business mix, with an increasing focus on the India market, supported by strategic shifts introduced by the professional management team appointed by KKR. The company is strengthening its presence in cardio-metabolic therapies and expanding into new therapeutic areas such as paediatric, ophthalmology, and urology. We forecast a 14% CAGR in revenue growth and 19% earnings growth over the next few years. Following 2QFY25, we maintain a BUY rating with a target price of INR 2277.

* Domestic in-line: Domestic formulations grew 22% YoY (in line) aided by ophthalmology portfolio, excluding which topline grew 12% YoY led by 6%/5% price and volume growth respectively. The company continued its outperformance of the IPM growing 340bps ahead of the market as of MAT Sep’24. Major brands continued to grow well with Cilacar, Cilacar-T, Rantac, Nicardia, Metrogyl and Sporlac gained ranks as per IQVIA. The opthal portfolio strong growth with secondary sales growth at 18-19%, the management plan to increase doctor coverage to 16-17k (13.5k at present) and have expanded their MR team to 105 (from 65) to achieve this target. Going ahead, JBCP is expected to grow faster than the IPM driven by improving market share, focus on chronic brands and high growth segments across key brands.

* Export formulations beat estimates: Internaltional formulations grew 14% YoY to INR 3bn (5% beat) driven by double digit growth in USA & South Africa, while Russia and BGx export markets recorded high single digit growth. The company will see better traction in their RoW BGx markets with close to 20 product filings complete. The first batch of 10 products will be launched from 3QFY26 and the remaining in FY27. JBCP maintain its run rate of three filings a year for the US market as they have done on the pst two years and approvals for the same should start coming through in the next 9-12 months.

* CDMO deferred and API miss: CDMO segment declined 19% YoY as sales of ~USD 2mn for the quarter got deferred to 3Q due to challenges in availability of raw material. The management indicated a strong revival with 20%+ growth in 2H. The management maintained their aim of growing the CDMO segment to USD 100mn over the next 3-5 years. This will be achieved through 1. Entering newer categories in lozenges; 2. Bringing in new dosage forms such as stick packs and throat sprays; 3. Tie-up with new partners and 4. Entering newer markets such as Brazil, Europe and USA. The API segment declined 17% YoY to INR 190mn ahead of our estimate of INR 150mn.

* Key Financials: - Revenue/EBITDA/APAT grew +13.5%/+11%/+16% to INR 10bn/2.7bn/1.7bn were +1%/in line/+6% vs JMFe;

* Gross margin were flat YoY at 66% (JMFe: 67%)

* EBITDA margin contracted by 60 bps YoY at 27% (JMFe: 27.4%) due to higher ESOP charges and elevated freight costs for the international business;

* The company held higher levels of inventory were on account of anticipated increases in API costs and ophthalmology inventory

* Gross debt reduced to INR 820mn (vs. INR 3.6bn as of Mar’24)

* Cash and equivalents were at INR 4.2bn

Please refer disclaimer at https://www.jmfl.com/disclaimer

SEBI Registration Number is INM000010361