JB Chemicals and Pharmaceuticals Limited. –Q4FY18 Results Confirm Our Bullish Stance

India Equity Value investor, Trivikram Consultants

Prashant Vaishampayan

India Equity Value investor

Picking Long Term Multi-bagger stocks

Trivikram Consultants

Trivikram Consultants is an equity research service founded by Prashant Vaishampayan, a registered Research Analyst with SEBI in India. Prashant has done equity research since 1992.  He worked with Jardine Fleming, SG Securities, UBS and Kotak Securities. Since 2010, he is managing his portfolio and doing outsourced equity research for institutional clients. A team of six professionals helps him in equity research. We focus on pharma, agro-chemicals, auto and auto components, banks and financial services, specialty chemicals and niche manufacturing sectors.   

Equity Bottom-Up

J.B. Chemicals & Pharmaceuticals / Equity Bottom-Up

J.B. Chemicals & Pharmaceuticals (JBCP IN)

<p><a href="https://www.smartkarma.com/entities/7360" target="_blank" data-smartkarma-citation="entities:7360:1">J.B. Chemicals &amp; Pharma Ltd (JBCP IN)</a> (JBCPL) ranks 35th in sales in India according to IMS data for FY17. Indian business contributed 55% while international sales accounted for 45% of FY17 sales. Its key international markets are in Russia, South Africa, US. JBCPL is known in trade circles as Unique Pharmaceutical Laboratories. </p><p>JBCPL should be a part of an investor's long-term portfolio for the following reasons -</p><ul class=""><li>JBCPL  focuses on therapeutic areas like cardiovascular, diabetes, anti-infectives, analgesics, antibiotics. Its Indian sales have grown steadily 10-16% in last three years despite changes such as GST, demonetisation.  </li><li>It has finished capital expansion plan at the Panoli facility that will focus on the development of new drugs for Indian and International markets to drive the revenue growth. Addition of 600 medical representatives in 4Q FY17 and a further increase of 250 representatives until April 2018 to support the Indian market is expected to boost the top-line from FY19E. International business especially the US (9 products approved and 5 are awaiting approval) will likely ramp up over the next two years.   </li><li>We arrive at a fair value estimate over the next 12 months Rs480/share. This is arrived at by applying a multiple of 15x to FY20E EPS of Rs27.8 and adding Rs61 cash on hand per share. Increase in the sales representatives impacted the EBITDA margins in FY18E, we expect JBCPL to see margin expansion from FY20 as they become fully productive.  <table class="table table-striped"><tbody><tr><td>Summary</td><td></td><td></td><td></td></tr><tr><td><strong>Particulars</strong></td><td><strong>FY18E</strong></td><td><strong>FY19E</strong></td><td><strong>FY20E</strong></td></tr><tr><td><strong>PE (x)</strong></td><td>17.2</td><td>13.6</td><td>9.8</td></tr><tr><td><strong>Business ROCE (%)</strong></td><td>13%</td><td>15%</td><td>19%</td></tr><tr><td><strong>ROE (%)</strong></td><td>10%</td><td>12%</td><td>15%</td></tr></tbody></table></li></ul>

J.B. Chemicals &amp; Pharma Ltd (JBCP IN) (JBCPL) ranks 35th in sales in India according to IMS data for FY17. Indian business contributed 55% while international sales accounted for 45% of FY17 sales. Its key international markets are in Russia, South Africa, US. JBCPL is known in trade circles as Unique Pharmaceutical Laboratories. JBCPL should be a part of an investor's long-term portfolio for the following reasons -JBCPL  focuses on therapeutic areas like cardiovascular, diabetes, anti-infectives, analgesics, antibiotics. Its Indian sales have grown steadily 10-16% in last three years despite changes such as GST, demonetisation.  It has finished capital expansion plan at the Panoli facility that will focus on the development of new drugs for Indian and International markets to drive the revenue growth. Addition of 600 medical representatives in 4Q FY17 and a further increase of 250 representatives until April 2018 to support the Indian market is expected to boost the top-line from FY19E. International business especially the US (9 products approved and 5 are awaiting approval) will likely ramp up over the next two years.   We arrive at a fair value estimate over the next 12 months Rs480/share. This is arrived at by applying a multiple of 15x to FY20E EPS of Rs27.8 and adding Rs61 cash on hand per share. Increase in the sales representatives impacted the EBITDA margins in FY18E, we expect JBCPL to see margin expansion from FY20 as they become fully productive.  SummaryParticularsFY18EFY19EFY20EPE (x)17.213.69.8Business ROCE (%)13%15%19%ROE (%)10%12%15%

JB Chemicals: Ready for the Growth Ahead