JB Chemicals & Pharmaceuticals Limited — Q3 FY25 earnings call

Call held 5 Feb 2025

Management summary

J B Chemicals delivered a strong Q3 FY25 performance characterized by robust domestic growth and a sharp recovery in the CDMO segment. The company successfully navigated currency headwinds in Russia and softness in the US market through improved product mix and cost efficiencies. Management remains bullish on maintaining high-teen growth in India and mid-teen growth in CDMO over the medium term while guiding for steady operating margins.

Highlights

  • Revenue grew 14% YoY to ₹963 crores, maintained quarterly run rate

  • Operating EBITDA (ex-ESOP) increased 15% to ₹270 crores with margins at 28.1%

  • Net Profit surged 22% YoY to ₹162 crores

  • Domestic business grew 22% to ₹566 crores, now contributing 60% of total revenue

  • CDMO business reported strong recovery with 33% growth to ₹118 crores

  • Progressive portfolio now accounts for 65% of domestic business, up from 35% four years ago

  • Ophthalmology portfolio showed 28% growth, significantly outperforming market growth of 9%

  • Net cash position stood at ₹516 crores as of December 31, 2024

Key financials

  1. Revenue ₹963 Cr +14%YoY
  2. Operating EBITDA ₹270 Cr +15%YoY
  3. EBITDA Margin 28.1%
  4. Net Profit ₹162 Cr +22%YoY
  5. Gross Margin 67.1%

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
₹963 Cr Total
  • Domestic Business ₹566 Cr 58.8%
  • International Operations ₹397 Cr 41.2%

Guidance & targets

Margin

  • Operating EBITDA Margin Margin · FY25 · High confidence 26-28%
    We aim to deliver operating margins between 26 and 28% despite inflationary pressures and external market's uncertainty.

    — Narayan Saraf, CFO

  • Gross Margin Margin · Near future · High confidence 66-67%
    But however, we continue to hold that it will be in the range of 66% to 67% in the near future.

    — Narayan Saraf, CFO

Other

  • ESOP Cost Other · FY25 · High confidence ₹56 crores
    So, at the full year level, we are looking at around 56 crore kind of ESOP cost for FY '25.

    — Narayan Saraf, CFO

  • ESOP Cost Other · FY26 · Medium confidence ₹40 crores
    In FY '26, we are looking at around 40 crore.

    — Narayan Saraf, CFO

Revenue

  • Domestic Business Growth Revenue · FY26 · Medium confidence Mid-teens
    So, you should see us growing at mid-teens in India business backed up by strong volume growth.

    — Nikhil Chopra, CEO

  • CDMO Business Growth Revenue · Short to medium term · Medium confidence Mid-teens
    But Quarter 4 also will be good as we have a strong order book, and you should see this business going at mid-teens short to medium term.

    — Nikhil Chopra, CEO

Risks & concerns

  • Currency Volatility (Ruble)

    medium

    MTM Forex impact of ₹4 crore recorded in Q3 due to ruble depreciation.

    Management acknowledged

  • US Business Softness

    low

    Revenues declined in the US during the first half, but management claims to be 'inching back' with a strong order book for Q4.

    Both downplayed

  • API Price Volatility

    low

    Management noted API prices are going up (Dollar touching 87-88) but currently mitigated by inventory build-up.

    Management acknowledged

Areas of evasion (1)

  • Specific market share comparisons with competitors like Telma.

Q&A highlights

2 direct
ESOP Cost Guidance and Russia Constant Currency Growth Direct
In Quarter 4, we expect another ESOP cost of 16 crore... Russia constant growth, it is around minus 5% versus minus 8%.

Provides clarity on non-cash charges impacting EBITDA and the underlying performance of the Russia business excluding currency volatility.

Asked by Rashmi Shetty, Dolat Capital

Ophthalmology Portfolio Growth Strategy Direct
The ophthalmologist coverage increased from 7,000 to currently what we are training at 14 to 15,000... every quarter, we will be adding one or two SKUs.

Explains the aggressive volume-led growth strategy for the newly acquired Ophthal portfolio through field force expansion and new launches.

Asked by Tausif, BNP Paribas Exane

Gross Margin Expansion Potential Partial
Currently India and CDMO business is already inching up towards closer to 70%... we would see a closer to 125 to 150 bps being added on our margin profile with these two segments always improving.

Highlights the structural shift towards higher-margin segments (India and CDMO) as a driver for future margin expansion.

Asked by Sumit Gupta, Centrum

2 min read 5 chapters

Detailed narrative

Domestic Market Outperformance and Portfolio Shift

JB Pharma's domestic business grew 22% YoY to ₹566 crores, significantly outpacing the Indian Pharma Market (IPM) growth of 8%. A key driver is the 'progressive portfolio,' which has expanded from 35% to 65% of domestic revenue over the last four years. The company now has 25 brands with revenue exceeding ₹25 crores, compared to only 6 brands in December 2020. Major brands like Cilacar, Nicardia, and Sporlac continue to gain market ranks, supported by a volume growth of 7% in Q3 FY25.

CDMO Recovery and Global Project Pipeline

The CDMO segment witnessed a sharp recovery in Q3 with 33% growth to ₹118 crores, following a soft first half. Management is bullish on this segment, guiding for mid-teen growth in the short to medium term. The growth is backed by a strong order book and the advancement of 4-5 large global projects expected to kick in over the next 18-24 months. New partnerships in Europe, including lozenge supply for Krka and Kenvue (Zarbees), are already contributing to traction.

Ophthalmology Integration Driving Synergies

The recently acquired Ophthalmology portfolio grew 28% in Q3, far exceeding the market's 9% growth. JB Pharma has expanded its ophthalmologist coverage from 7,000 to approximately 15,000 and deployed a dedicated field force of 120 people. Management expects this portfolio to contribute a 200 bps improvement to overall company EBITDA margins over the next 2-3 years as gross margins in this segment are near 70%.

Financial Resilience and Cash Position

Despite a slight dip in gross margins to 67.1% due to the dilutive impact of the Ophthal acquisition, operating EBITDA margins improved to 28.1%. The company is sitting on a strong net cash position of ₹516 crores and expects to end the year with ₹650-655 crores in cash after paying off all loans and a dividend payout of ₹130 crores. Finance costs were significantly reduced from ₹12 crores to ₹3 crores YoY due to gross debt reduction.

Strategic Focus on Chronic and Cardiology

JB Pharma continues to deepen its presence in cardiology, particularly in hypertension and heart failure. The company is leveraging its 'renal protective' positioning for Cilnidipine (Cilacar) to gain share from Amlodipine combinations. While the company attempted to enter the metabolic/diabetes space organically with Sitagliptin and Dapagliflozin, management admitted the competition is intense and will now focus on inorganic opportunities or adjacencies in cardiology where they have a stronger DNA.

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