Recommendation From Pharmaceuticals Sectors

This column gives you scrip chosen by the research team during the fortnight that is fundamentally strong and expected to give good capital appreciation over a time period of 1 year.


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PRESCRIPTION FOR HEALTHY GROWTH 

HERE IS WHY 
Robust financial performance 
Undertaking expansion activities 
Strong products portfolio

J.B.Chemicals and Pharmaceuticals Ltd
BSE Volume:506943
B:325

J.B.Chemicals and Pharmaceuticals Ltd (JBCPL) is a pharmaceutical company manufacturing and marketing a range of specialty products, including various pharmaceutical dosage forms like tablets, injectables, creams and ointments, lozenges, herbal liquids and capsules. JBCPL exports to over 50 countries across the world and earns more than half of its revenue from its international business. The company has nine manufacturing facilities across Ankleshwar, Panoli and Daman and 27 distribution locations across the country. 

In FY17, the domestic formulations segment contributed 36 per cent, whereas formulation exports segment contributed 39 per cent to the total sales of the company. The company’s revenue grew at 12 per cent CAGR over FY13-17. This was driven mainly by strong performance of domestic formulation business. The domestic formulation sales rose on the back of healthy growth in focus products, including gastro and anti-hypertensive segment. The company’s overall revenue is expected to grow further due to investment in products, marketing and brand building, and expectation of stabilisation of domestic currency against the US dollar. 

The company’s US sales grew considerably on the back of its enhanced focus on the US business. The company’s US sales contributes around 8 per cent to the total sales. The company has increased focus on ANDA filings and this is expected to drive its US business going forward. The company has also strengthened its workforce by adding more than 600 medical representatives. 

On the financial front , the net sales of the company increased by 21.42 per cent to Rs349.93 crore in the second quarter of FY18, as against Rs288.19 crore in the same quarter of the previous year. The company’s PBT increased 10.33 per cent to Rs67.95 crore in the second quarter of FY18 on a yearly basis. The company’s net profit also increased 14.42 per cent to Rs51.72 crore in Q2 FY18 compared with the net profit of Rs45.2 crore in the Q2 of the previous year. 

On an annual basis, the company’s net sales increased 11.55 per cent to Rs1368.32 crore in FY17 on a year-onyear basis. The company’s PBT increased 10.11 per cent to Rs229.94 crore in FY17, as against Rs208.82 crore in the previous fiscal. The net profit of the company increased 13.88 per cent to Rs184.4 crore in FY17 as compared with Rs161.92 crore in the previous fiscal. 

On the valuation front , the company has a PE ratio of 17.15x. The company is virtually debt-free with a debt-to-equity ratio of 0.04x. The company has been maintaining a healthy dividend payout of 36.42 per cent. The company’s return on equity (RoE) and return on capital employed (RoCE) stood at 10.45 per cent and 22.93 per cent, respectively. The company’s revenue is expected to increase on the back of expansion activities to cater to the domestic and export formulations segments. Also, the strengthening of the domestic currency against the US dollar in recent times will increase margins for the company. We recommend our reader-investors to BUY the stock.