Stock Of The Day: JB Chemicals Surges After Kotak Initiates 'Buy'
Shares of JB Chemical & Pharmaceutical Ltd. surged nearly 9% on Monday after Kotak Institutional Equities initiated coverage with a 'buy' rating, citing that the stock will trade at a premium to other domestic-focussed companies. The brokerage set the target price at Rs 2,025 apiece, implying an upside potential of 15% from current levels.
Shares of the company are expected to trade at a premium on the back of:
Leading market share across its legacy brand families.
An imminent ramp-up of the acquired portfolios.
Robust contract manufacturing organisation traction.
Less exposure to the US, EU, and other regulated markets.
Unparalleled execution track record.
Shares of JB Chemical & Pharma surged 8.63% intraday before paring gains to trade 1.85% higher at Rs 1,787.15 per share. This compares to a 0.27% gain in the NSE Nifty 50. The stock has risen 10.73% year-to-date.
Key Levels
Resistance level: Rs 1,927 per share (three-week high).
Support level: Rs 1,669 apiece (three-day low).
Kotak On JB Chemicals
While the stock has had a phenomenal run over the past five years (up 10 times), current valuations of 21 times and 33 times of EV/Ebitda and price-to-earnings estimates, respectively, for fiscal 2026 are yet to fully encapsulate the growth potential of the business, Kotak said.
Currently ranked as the 22nd largest player in the Indian pharmaceutical market—used to hold the 32nd rank three years ago—the company has handsomely outperformed the IPM in the past decade by nearly 600 basis points.
Given the strong brands driving higher MR productivity, the brokerage expects a compound annual growth rate of 13% in organic domestic sales over fiscal 2024–2027. It also expects the high-margin contract manufacturing organisation vertical to double by fiscal ending March 2028, driven by a healthy order book and enhanced capacity.
"Overall, we forecast a compound annual growth rate of 14% in sales and 17% in Ebitda for JB over fiscal 2024–2027. We expect a 230 basis point expansion in JB's EBITDA margins over fiscal 2024-2027, driven by higher domestic productivity and a higher branded/CMO mix, despite factoring in compression due to the Novartis deal," Kotak Institutional Equities said.
Key Risks
Any senior management exits.
Resurfacing of N-Nitrosodimethylamine, or NDMA, concerns relating to Rantac. NDMA is a known carcinogen.
High domestic sales concentration.
Aggressive amortisation policy of the acquired brands
Analyst Recommendations
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