CD Equisearch Pvt Ltd July 20 th , 2015 Equities Derivatives Commodities Distribution of Mutual Funds Distribution of Life Insurance J B Chemicals & Pharmaceuticals Ltd. No. of shares (crore) 8.48 Mkt cap (Rs crs) 2286 Current Price (17/07/2015) 270 Price Target 333 52 week H/L (Rs.) 275/152 Book Value (Rs) (FV 2) 117 P/BV (FY16e/17e) 2.1/1.9 P/E (FY16e/17e) 17.4/13.8 EPS growth (FY16e/17e) 13.8/26.7 ROE(FY16e/17e) 12.6/14.5 Beta 1.0 BSE Code 506943 NSE Code JBCHEPHARM Bloomberg JBCP IN Reuters JBCH.BO Daily volume (avg. weekly) 341215 Shareholding pattern % Promoters 55.8 MFs / Banks / FIs 3.4 Foreign 5.0 Non-Promoter Corp. 4.1 Total Public 31.7 Total 100.0 As on June 30, 2015 Recommendation BUY Analyst TANYA KOTHARY Phone: + 91 (33) 44880023 E- mail: [email protected]Figures in Rs crs FY13 FY14 FY15 FY16e FY17e Income from operations* 866.13 1021.87 1144.22 1276.13 1473.35 Other income 26.65 36.81 10.89 15.01 18.78 EBITDA (Other income included) 132.30 120.80 191.23 228.12 278.93 Net profit after extraordinary items 62.83 88.60 115.30 131.18 166.14 EPS 7.42 10.45 13.60 15.47 19.59 EPS growth (%) -5.6 41.0 30.1 13.8 26.7 Equity^ 16.94 16.95 16.96 16.96 16.96 *Includes other operating income Company Brief JBCPL, one of India’s leading pharmaceutical companies, manufactures & markets a diverse range of pharmaceutical formulations, herbal remedies and APIs. JBCPL exports to more than 30 countries across the world and earned more than 53% of its revenue from exports in FY15. Highlights The company plans to invest Rs 140 crs in formulations & API plant in Gujarat. The company plans to invest in this new capacity and related infrastructure in the next 12-18 months. The company is ranked 36 th in the industry, with its three brands viz.Rantac, (anti-peptic ulcerant), Nicardia (calcium channel blocker) and Metrogyl (amoebicides), featuring among top 300 brands in terms of both value and unit sales (IMS MAT March 2014) In FY14 the company has set up a wholly owned subsidiary company Unique Pharmaceuticals Laboratories FZE in Dubai. It has commenced sales and distribution of products in Russia-CIS in FY15. During Q4FY15 the JBCPL registered a growth in standalone sales of 11.6% YoY at Rs 255.10 crs. The operating margins stood at 16.6%. On a consolidated level the adjusted operating margins improved by 256 bps to 17.1% in FY15 as against 14.5% in FY14. The company has been paying quite liberal dividend for the last two years (FY13-14) at 150% and this time the company rewarded its shareholder with a onetime special dividend of 500% (over and above 200% regular) totaling it to 700%. The outlook for the company remains positive and we expect revenues and profit to grow at a CAGR of 13.5% & 20.0%, respectively over 2015-17. The stock at the price of Rs 270 trades at 17.4x FY16e earnings and 13.8x FY17e earnings. Strong traction in domestic business & expansion of capacities will drive future growth. Therefore, we recommend BUY on the stock with target of Rs 333 based on 17x FY17e earnings (PEG Ratio 0.85), over the next 9-12 months.
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CD Equisearch Pvt Ltd July 20
th, 2015
Equities Derivatives Commodities Distribution of Mutual Funds Distribution of Life Insurance
Equities Derivatives Commodities Distribution of Mutual Funds Distribution of Life Insurance
Recommendation
JBCPL’s wide geographical presence in international markets and strong product portfolio with high growth brands
and strong marketing capability gives a positive outlook for overall business of the company. The company has
crossed the iconic milestone of Rs 1000 cr sales mark in FY14. The company has embarked on to the next phase of
journey in July 2011, post sale of the Russia-CIS OTC business, and the company has made a comeback in just three
years by effectively focusing on growth markets internationally. The supply agreement with Cilag GmbH
International (‘Cilag’), a wholly owned subsidiary of Johnson & Johnson, has been functioning smoothly.
The increase in per capita income, and in turn the increase in per capita consumption of drugs, improved healthcare
access and increasing health awareness are expected to continue to aid growth opportunity in domestic formulations
business. As successful penetration into new markets will accelerate the next level of growth, the company believes
that its well established brands will be the strong pillar around which the company will grow.
The international business poses challenges, such as increased competition, rapidly changing regulatory environment
and increasing span of price controls in some markets. However, the company is optimistic about its good growth
prospects.
The R&D division of the company continues to play an important role in the company’s growth. Its R&D is currently
focused on the new formulations development and ANDAs filings. The company has enhanced its focus on US
market and plans to file new ANDAs and is also considering backward manufacturing of APIs used in these ANDAs
to make the business more profitable. JBCPL has envisaged capex of Rs140 crs to be spent in next 12-18 months. This
capex is progressing as per schedule. The consolidated income from operation in FY15 registered a growth of 12%
YoY. The political situation in Russia and Ukraine and depreciation of rouble against US dollar also impacted the
business. The situation has improved in these markets after April, but the company is cautiously watching the
developments in these markets. The company has around Rs 568 crs (Cash + Investments) as on FY15. The company
does not plan to invest this money in haste and will invest it when the right opportunity emerges.
The company has a consistent, strong free cash flow annually, with a low debt-equity of 0.1x. With the
commencement of the sales and distribution of products from its wholly owned subsidiary in Dubai, we expect
revenues and profit to grow at a CAGR of 13.5% & 20.0%, respectively over 2015-17. The stock at the price of Rs 270
trades at 17.4x FY16e earnings and 13.8x FY17e earnings. Strong traction in domestic business & expansion of capacities
will drive future growth. Therefore, we recommend BUY on the stock with target of Rs 333 based on 17x FY17e
earnings, (PEG Ratio 0.85), over the next 9-12 months.
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CD Equisearch Pvt Ltd
Equities Derivatives Commodities Distribution of Mutual Funds Distribution of Life Insurance
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