JB Chemicals & Pharmaceuticals Limited Q3 FY22 Earnings Conference Call Insights

Key highlights from JB Chemicals & Pharmaceuticals Limited (JBCHEPHARM) Q3 FY22 Earnings Concall

Management Update:

• The company outperformed the sector with a growth of 27% versus market growth of 10% in 3Q22. Company’s new product introductions are performing well in the market, considering that its contribution is now close to 4.2% of domestic sales in 3Q22 and 4% for nine-months FY22.

• Internationally, the company witnessed steady revival across geographies, except for muted demand in US generics business.

Q&A Highlights:

• Abdulkader Puranwala from Elara Capital asked about the India growth breakup into price, volume and new launches. Lakshay Kataria CFO commented that India growth has a component of about 4%, that came from new products. And at the overall level, YTD have seen a growth of about 30%. And between price and volume, price will be closer to about 10% and rest would be volume.

• Abdulkader Puranwala from Elara Capital asked about the level of margin the company is looking at, if 23-24% would sustain or it can go up to 25% on the EBITDA level, adjusting for ESOPs. Lakshay Kataria CFO said the operating EBITDA for 3Q22 before ESOPs is INR153 crores, which is about 25.5%. The reported EBITDA of INR128 crore includes ESOP charge of INR25 crores.

• Naresh Vaswani from Sameeksha Capital asked that for FY23, how the company is placed in terms of growth in different geographies. Nikhil Chopra CEO said that looking at order book for 4Q22 and 1Q23, the company is seeing demand bouncing back in the branded generic market, CMO is seeing big revival, with Russia and South Africa performing well in 3Q22. The run rate for international business of INR300 crore plus should see a positive momentum going ahead.

• Naresh Vaswani from Sameeksha Capital enquired that in terms of price increases, if the company has considered the increase in overhead cost also. Lakshay Kataria CFO replied that overall from a pricing perspective, the company is now in conversations with a lot of its customers in the international markets. Therefore pricing will continue to be a key focus area for the international businesses moving forward.

• Vishal Manchanda from Nirmal Bang enquired about what percentage of Rantac sales in 3Q22 came from higher prices. Nikhil Chopra CEO commented that it would be around 60%. But also with the entire cost of API, foil, packaging material going up, conceptually, this is just helping the company to maintain the right EBITDA margin overall.

• Vishal Manchanda from Nirmal Bang asked about any developments in lozenges business, in terms of new contracts or new product development that will help in the near term. Nikhil Chopra CEO said that in the CMO business the company is seeing big demand bouncing back, which is a positive sign. The company is working on some new novel concepts in the world of lozenges, which are more consumer-friendly.

• Vishal Manchanda from Nirmal Bang also asked that if new client addition, Reckitt, has started delivering or it will scale up in time. Nikhil Chopra CEO said that just a couple of products the company has started supplying to Reckitt, but overall, good demand should be seen in the next financial year.

• Vishal Manchanda from Nirmal Bang queried if other expenses would stay at current levels and ESOP expenses also around the same level for the coming quarter. Nikhil Chopra CEO said ESOP expense would be close to INR25 crores and other expenses in terms of the entire capability development have normalized. Overall from an operational perspective, costs are close to normal.

• Vishal Manchanda from Nirmal Bang asked about the nephrology portfolio. Nikhil Chopra CEO commented that in that portfolio, there is a risk division, which has been working with 2,000 nephrologists in the country. The portfolio is a mix of supportive products. There is a good uptake in terms of the new products that were launched. The bigger picture is that the company wants to take Nicardia and Cilacar to next level.

• Rahul Jeewani from IIFL asked that what quantum of duration the company saw the benefit of Rantac price hike during the quarter. Kunal Khanna, President said just close to 45 days of demand for Q3 was serviced through Rantac. However, from a pure volume perspective, the demand would moderate in H2 because the Q1 run rate had seen a huge surge due to second wave of COVID.

• Rahul Jeewani from IIFL enquired about how one can look at the India business growth for FY23 and if the momentum in FY22 will sustain in FY23. Nikhil Chopra CEO said that overall, with the widened portfolio that the company has got with big brands, with new productions and with the Sanzyme portfolio, it will see how more and more number of patients can be served and deliver market-beating performance.