JB Chemicals & Pharmaceuticals Limited — Q2 FY25 earnings call

Call held 7 Nov 2024

Management summary

J B Chemicals delivered a strong Q2 FY25, crossing the ₹1,000 crore revenue milestone driven by robust 22% growth in the domestic market. While the CDMO segment faced temporary supply chain headwinds that deferred $2 million in sales to Q3, management remains confident in its long-term $100 million revenue target for the segment. The company continues to maintain industry-leading margins of ~28% while aggressively scaling its acquired chronic and ophthalmology portfolios.

Highlights

  • Revenue reached ₹1,001 crore for the quarter, representing a 13% YoY increase.

  • Domestic business grew 22% YoY to ₹588 crore, significantly outperforming the Indian Pharmaceutical Market (IPM).

  • Operating EBITDA (excluding ESOP) stood at ₹285 crore with a margin of 28.4%.

  • Net profit increased by 16% YoY to ₹175 crore.

  • International business revenue grew 3% to ₹413 crore, impacted by a $2 million CDMO sale deferment.

  • Gross margins remained steady at 66.2%, aided by favorable product mix and price growth.

  • The company reduced gross debt significantly to ₹82 crore from ₹358 crore in March 2024.

  • Ophthalmology portfolio, integrated in Jan '24, grew 19% sequentially over Q1 FY25.

Key financials

  1. Revenue ₹1,001 Cr +13%YoY
  2. Operating EBITDA Margin 28.4%
  3. Net Profit ₹175 Cr +16%YoY
  4. Gross Margin 66.2%
  5. Gross Debt ₹82 Cr -77%YoY

What they filed

Q4 FY26: revenue down 7.2%, net profit down 35.3% against the same quarter last year.

₹ Cr · quarterly
Line itemQ1 FY25Q2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26
Revenue952 956 914 901 1,040 +9%1,023 +7%991 +8%836 −7%
EBITDA273 268 245 231 293 +7%298 +11%270 +10%195 −16%
Net profit173 173 156 150 198 +14%200 +16%179 +15%97 −35%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

Share of Revenue
₹1,001 Cr Total
  • Domestic Business ₹588 Cr 58.7%
  • International Business ₹413 Cr 41.3%

Guidance & targets

Margin

  • Operating EBITDA Margin Margin · FY25 · High confidence 26%-28%

    From 26%-28% today

    We reiterate our guidance for operating margins between 26% and 28%.

    — Narayan Saraf, CFO

Revenue

  • CDMO Business Revenue Revenue · 3-5 years · Medium confidence $100 million

    From $100 million today

    our guidance in terms of the business that we want to take it to $100 million still stands as is.

    — Nikhil Chopra, CEO

Capex

  • Total Capex Capex · FY25 · High confidence ₹100+ crore
    totaling this year, we will be investing around Rs. 100 plus crore of CAPEX

    — Narayan Saraf, CFO

Volume

  • Azmarda Monthly Run Rate Volume · by end of FY25 · High confidence 140,000-145,000 units

    From 125,000 units today

    we are expecting is by the end of this financial year, we will be close to 140,000-145,000 units

    — Kunal Khanna, President Operations

Other

  • Net Operating Cash to EBITDA conversion Other · FY25 · High confidence +80%
    Very clearly, we are very confident that our net operating cash for FY24 as a percentage to EBITDA will be (+80%) like previous years.

    — Narayan Saraf, CFO

Risks & concerns

  • CDMO Raw Material Availability

    medium

    Specific excipients from regulated markets were delayed, deferring $2M in sales to Q3 FY25.

    Management acknowledged

  • Currency Volatility (Ruble)

    low

    MTM FOREX impact of ₹4 crore recorded in Q2 due to Ruble depreciation.

    Management acknowledged

  • Inventory Normalization

    low

    Management expects a marginal impact in Q4 due to inventory normalization in the India business.

    Management acknowledged

Areas of evasion (1)

  • Refusal to provide a market-wise split for the 20 new international filings due to 'business specific strategy'.

Q&A highlights

3 direct
CDMO Business Growth and Potential Direct
it is now close to $50 million, we want to take it $100 million in 3-5 years... you should see business ramping up because couple of million dollar got deferred in quarter 3 because of the material availability.

Confirms that the CDMO slowdown in H1 was due to temporary supply issues rather than structural demand loss.

Asked by Amey, JM Financial

Ophthalmology Portfolio Performance Direct
We took it from 65 to closer to 105 [MRs] and we are right now covering close to 13,500 ophthalmologists... we are seeing good sequential growth and very strong secondary trends.

Highlights the successful integration and aggressive expansion of the newly acquired ophthalmology segment.

Asked by Harith Ahmad, Avendus Park

Domestic Ranking and Aspiration Direct
Today, we are 22nd by value and 16th by prescription. If you ask aspiration, we want to inch up in terms of where we want to be in terms of prescription, we want to be in top 10.

Clarifies management's strategic focus on prescription-led growth rather than just chasing value-based rankings.

Asked by Abdulkader Puranwala, ICICI Securities

2 min read 5 chapters

Detailed narrative

Domestic Business Outpaces Market Growth

The domestic business delivered a stellar 22% YoY growth, reaching ₹588 crore. Even excluding the new Ophthalmology portfolio, organic growth stood at 12.6%, significantly higher than the IPM growth of 7.6%. All top five brands are now among the top 150 in the country, with the company jumping from rank 15 to 8 in the Cardiology market since 2021.

CDMO Segment: Temporary Headwinds vs. Long-term Targets

The CDMO business was muted in H1 FY25 due to material availability challenges, specifically unique excipients from regulated markets. This resulted in $2 million of sales being deferred from Q2 to Q3. Despite this, management reiterated its target to double the business from ~$50 million to $100 million in the next 3-5 years, supported by a robust order book for H2 FY25.

Ophthalmology Integration and Prescriber Expansion

The Ophthalmology portfolio, integrated in January 2024, is scaling rapidly with 19% sequential growth in Q2. Prescriber coverage has nearly doubled from 7,000 to 13,500 ophthalmologists, with a target to reach 16,000-17,000 in the next 12 months. The company plans to launch a new product in this segment every three months to fill unmet needs in glaucoma, pain, and anti-allergics.

Financial Discipline and Margin Guidance

Management reiterated its operating EBITDA margin guidance of 26%-28% for FY25. Gross margins improved by over 150 bps YoY (excluding Ophthalmology) due to cost optimization and favorable product mix. The company has also significantly deleveraged, reducing gross debt from ₹358 crore in March to just ₹82 crore in September 2024.

Strategic Focus on Chronic Portfolios

The thrust on chronic and high-growth portfolios remains central to the strategy. Azmarda is projected to grow at 15%-20% CAGR for the next 5 years, while the Razel franchisee grew 28% YoY. The company is also focusing on lifecycle management (LCM) for mature brands like Metrogyl and Rantac through new extensions like Metrogyl ER and Rantac OD to maintain growth.

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