JB Chemicals - Normalised Growth To Dampen Earnings Flare Up; Downgrade To 'Reduce': Yes Securities
Input cost decline not meaningful in recent months.
BQ Prime’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer BQ Prime’s subscribers an opportunity to expand their understanding of companies, sectors and the economy.
Yes Securities Report
We assess the potential triggers ahead for margin expansion and sustainability of acquisition-led high growth phase of last one year for JB Chemicals and Pharmaceuticals Ltd.
A large part of growth catch-up in acquired brands is complete as Sporlac, Azmarda scale up towards Rs 850 million-one billion brands each.
Moreover, contract manufacturing which has more than doubled over past three years would have included tailwinds for medicated lozenges in the pandemic; since gestation period is long for new product introduction and onboarding new customers (renewed traction only after Q4 FY24), reckon CMO segment might consolidate or struggle in FY24 which would also dampen the incremental Ebitda growth from CMO.
Additionally, margin expansion lever appears weaker after completion of growth catch up especially as input costs have not declined significantly since Q4 FY23.
We note FY24/25 earnings growth is already factored at 30% compound annual growth rate leaving little room for disappointment; downgrade to 'Reduce' as likely tepid Q1, lack of earnings surprises preclude any price-earnings rerating.
Click on the attachment to read the full report:
This report is authored by an external party. BQ Prime does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of BQ Prime.
Users have no license to copy, modify, or distribute the content without permission of the Original Owner