Dolat Capital recommended reduce rating on JB Chemicals and Pharmaceuticals with a target price of Rs 688 in its research report dated July 07, 2020.
Dolat Capital's research report on JB Chemicals and Pharmaceuticals
JBCPL reported a strong Q4, led by 25% growth in domestic formulations (pre-emptive buying), however, logistical challenges led to de-growth in exports (down 7% YoY). EBITDA margins at 21.4% (up 210 bps YoY) was led by better product mix and cost optimization. Management guided for a soft Q1 for domestic (slowdown in acute segment) though its expects to outperform IPM and guided recovery in exports in FY21E. Further, it remains confident of its growth in the medium term led by newer launches in India, traction in CMO and its export branded generics markets with sustenance of healthy EBITDA margins at 20%+.
Outlook
While we remain confident of KKR’s ability to drive business, the buyout transition gives lower visibility of new management at this point. Further, the recent run-up in the stock price has narrowed the gap to a considerable extent (trading at 19.1x FY21E and 16.8x FY22E). While we do reckon the strong FCF generation and no major capex requirements in the near term, we see limited scope of re-rating. Maintain Reduce.
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