JB Chemicals: New launches, market share gains to drive growth

Key chronic segments have helped the JB Chemicals outperform the Indian pharma market.

At 28 per cent, JB Chemicals and Pharmaceuticals posted the best quarterly revenue growth performance in the December quarter among larger generic pharma companies. The KKR-owned pharma major which gets about 48 per cent of its revenues from the domestic formulation space outperformed its peers in the quarter on the back of strong growth in the cardiovascular segment.

The company continues to fare better than peers in the current quarter as well. At 11-13 per cent y-o-y in the first two months of the March quarter, its growth is ahead of the sector’s 1-5 per cent over the same period. Growth in February was led by top 10 brands, which account for 83 per cent of sales, with gastrointestinal and dermatology accounting for a larger share of the gains.

The management is looking at expanding the revenue share of the chronic segment to 60 per cent of sales over the next two years. This higher share of the fast growing chronic segment would come about as the result of new launches, expansion into new therapies, market share gains in existing brands, higher capex as well as productivity gains.

Prabhudas Lilladher expects JB Chemicals to be one of the best performing companies going ahead in the Indian pharma market and rank amongst top 20 companies as compared to its current rank of 28. Its key growth drivers would be India formulations followed by contract manufacturing and development.

Further margins too, are expected to trend up going ahead. Analysts at IIFL believe that margins are which are trending at 26 per cent (adjusted for the cost controls during the coronavirus pandemic) can improve further to 27.5-28 per cent by FY23 led by continued outperformance in the India market, improvement in productivity of medical representatives, further cost optimisation initiatives and improving business mix .

Given the strong run of growth in recent months and Q3 performance, analysts have upgraded the earnings estimates of the company by 10-12 per cent for FY21 and FY22. While the stock has gained 19 per cent over the last three months, given the target price of IIFL of Rs 1,450, there is still a 20 per cent upside from the current levels.