Buy This Pharma Stock For 22% Upside: ICICI Securities

ICICI Securities Limited a broking firm has suggested buying the stock of JB Chemicals Pharmaceuticals Ltd. with a target price of Rs2,046/share. The stock is now trading at Rs 1,671 and the brokerage expects a 22 percent gain. According to the brokerage JB Chemicals & Pharmaceuticals (JBCPL) Q2FY22 performance was better than estimates driven by strong growth in India business. EBITDA margin was lower than estimates owing to ESOPs charge. Consolidated revenue grew 33.7% YoY to Rs5.9bn and EBITDA margin dropped 340bps to 21.4%. Adjusted PAT grew 32.4% YoY to Rs978mn. Full quarter benefit of 50% price increase in Ranitidine would start from Q3FY22 and would support margins. We remain positive considering ~45% of total revenues and ~60% of EBITDA contribution is from domestic formulations with strong growth visibility. The managements strategy is towards improving productivity in India business, portfolio expansion and cost optimisation the brokerage claims.Advertisement The brokerage has said that We expect 15.3% revenue and 15.9% PAT CAGR over FY21-FY23E led by a strong 18.9% CAGR in India business with stable EBITDA margins at ~25-27%. We estimate a healthy free cashflow generation of more than Rs6bn over the next two years. RoE, RoCE and RoIC would remain strong at 22.4%, 21.6% and 33.1% respectively in FY23E. ICICI Securities has clarified in its research report that We expect JBCPL to register earnings CAGR of 15.9% over FY21-FY23E driven by revenue CAGR of 15.3% and stable EBITDA margin at 25-27%. The company has enough capacity for future growth and going ahead, it is expected to continue generating strong operating and free cashflow, which would raise return ratios (RoE, RoCE and RoIC) further. The stock now trades at 26.7xFY22E and 21.9xFY23E earnings and EV/EBITDA of 20.2xFY22E and 15.9xFY23E. Maintain BUY with a target price of Rs2,046/share based on 27xFY23E EPS. This stock is picked from the brokerage report of ICICI Securities. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.