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Operational reset quarter

J.B. Chemicals & Pharmaceuticals (JBCP) Q4FY26 adjusted EBITDA was flat YoY impacted by certain one offs as company initiated post-acquisition integration activities. Revenue growth across key segments, including domestic business and CDMO, remained subdued during the quarter. Performance was impacted by several transitional measures undertaken during the period, including distribution network optimisation, discontinuation of low-margin trade generics, inventory rationalisation, and changes in credit practices.

We believe JBCP growth momentum to continue driven by

1) Geographical expansion of legacy brands

2) Improvement in MR productivity

3) Scale up in acquired brands

4) Launch of new products & therapies

5) Scaling up contract manufacturing business

6) Strong FCF generation. Further margins will continue to improve beyond FY27E with grant of perpetual license of acquired opthal portfolio. Our FY27E/28E EPS stands reduced by 1-3%. We expect EBIDTA CAGR of 20% over FY26-28E. At CMP, the stock is trading at 28x FY28E EPS. We maintain ‘BUY’ rating with TP of INR 2,400/share, valuing at 32x FY28E EPS.

 Weak quarter marred by certain one offs:

Q4 had certain one offs as company initiated post-acquisition integration activities. JBCP revenues declined by 5% YoY to INR 9bn, below our estimates. Domestic formulation grew by mere 2% YoY to INR 5.3bn. Export formulations declined 8% YoY to INR 2.6bn. Branded export markets grew 11% YoY. CDMO business declined 22.5% YoY whereas API sales were flat YoY at INR 192mn.

 EBITDA margins adj for ESOP at 26.4%:

Reported EBITDA came in at INR 2bn down 11% YoY. Margins stood at 22%; down 161 bps YoY. Adjusted for ESOP (INR 380mn), EBITDA was INR 2.4bn with OPM of 26.4%. GM’s increased 355bps YoY and 61bps QoQ to 70%. PAT came in at INR 1.3bn. Adj for one off PAT came at INR 1.5bn up 3% YoY.

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