JB Chemicals & Pharma: 70-75% of incremental Cap allocation towards India

21 Mar 2024 , 05:48 PM

Analysts of IIFL Securities hosted JB Pharma at IIFL’s Investor Conference in Mumbai. JB’s 70-75% of incremental capital allocation is towards India and mgmt targets India and CMO businesses to contribute 75-80% of overall revenue vs currently at 65%. JB expects its India business to consistently outperform IPM by 300-400bps led by robust growth in Chronic segment, scaling up of acquired brands, and improving MR productivity. JB will also target 70-80% of the overall Ophthal market led by new launches and acquired Ophthal portofolio’s margins will improve to more than JB’s own domestic business margins once the perpetual license kicks-in. We believe with consistent volume-led outperformance in India business and mid-teens growth in CMO business, JB’s revenue/operating Ebitda will grow at 15/19% Cagr over the next 3 years. 

JB’s acquisition of Novartis’ Ophthal brands in India to catapult it among the top-4 players: 

Opthal market is growing at 13-14% and market is consolidated among the top-4 players with 35-40% MS, which is in-line with JB’s GTM approach of being present in limited segments but having market dominance. TAM for the 10 acquired brands is Rs8-10bn but JB can target 70-80% of the overall Ophthal market of Rs43bn led by new launches in the Ophthal market. JB is also targeting to cover 20K Ophthalmologist vs current coverage of 14-15K, led by the expansion of MRs. Post the in-licensing deal in 2027, the op. Ebitda margins of the acquired portfolio will be higher than the current op. Ebitda margins of JB’s domestic business led by in-sourcing. 

Consistently outperforming IPM growth, led by Chronic brands of Cilacar and Nicardia. Cilacar franchise has now become Rs6.5bn portfolio for JB with MS of 35-40%. Lobun and Oxalo have achieved annual revenue run-rate of Rs400-450mn pa together vs marginal sales at the time of acquisition. Its Sporlac and Razel acquired brands are also doing well while with increasing competition in Azamarda, JB’s target is to grow volumes. Mgmt targets to improve PCPM from Rs6.3 lakhs pm to >Rs7.5 lakhs pm over the next 12-18 months, even without Novartis Ophthal acquisition. 

Target India and CMO business to be 75-80% of overall revenue over the next 3-5 years, given these businesses are high margin and high return profile. On the India business front JB targets to outperform IPM by 300-400bps and will likely revert to mid-teens growth in CMO business led by addition of new geographies, new products and new clients.