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JB Chemicals & Pharmaceuticals Ltd (JBCPL), a well-known name in the formulation and OTC markets of
India, is set to show a steady growth in its domestic and international businesses on the back a deeper
penetration of the existing markets, entry into newer markets and launch of new products.
Consequently, we expect its core business to grow at a compounded annual growth rate (CAGR) of 14.5%
over FY2010-12, driven by a CAGR of 17.5% in its domestic formulation business and a 12.8% CAGR in its international operations.
With investments in capacity expansion and aggressive marketing and promoting activities in newer
markets, we expect JB Chem to reflect overall growth as well as growth of specific focus brands.
Given the strong free cash flow of close to Rs100 crore annually, a low debt-equity ratio of 0.2x and a
limited capital expenditure (capex), the company is well placed to pursue inorganic opportunities. Considering
the double-digit growth in its revenues and the earnings from its core business, its strong free
cash flows and healthy return ratios (18-20%),
Valuation: At CMP 128, the company is trading at an attractive valuation of 7.7x FY2012 earnings of Rs16.5
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