Buy J B Chemicals & Pharmaceuticals, target price Rs 2,225: JM Financial

JM Financial has a buy call on J B Chemicals & Pharmaceuticals with a target price of Rs 2,225. The current market price of J B Chemicals & Pharmaceuticals is Rs 1608.45. The time period given by analyst is a year when J B Chemicals & Pharmaceuticals price can reach defined target. J B Chemicals, incorporated in 1976, is a Mid Cap company with a market cap of Rs 25050.02 crore, operating in the Pharmaceuticals sector.

J B Chemicals' key products/revenue segments include Pharmaceuticals, Other Operating Revenue, Export Incentives, Sale of services and Scrap for the year ending 31-Mar-2023.



Financials
For the quarter ended 31-12-2024, the company has reported a Consolidated Total Income of Rs 971.49 crore, down -3.87 % from last quarter Total Income of Rs 1010.57 crore and up 14.04% from last year same quarter Total Income of Rs 851.86 crore. The company has reported net profit after tax of Rs 162.49 crore in the latest quarter.

The company?s top management includes Mr.Arun Duggal, Mr.Nikhil Chopra, Mr.Prashant Kumar, Mr.Gaurav Trehan, Mr.Akshay Tanna, Mr.Sumit Bose, Ms.Padmini Khare Kaicker. Company has Deloitte Haskins & Sells LLP as its auditors. As on 31-03-2025, the company has a total of 16 crore shares outstanding.

Investment Rationale
Recent media articles have stated that an expert panel, in their report to the Drug Techincal Advisory Board (DTAB), has recommended a suspension on manufacturing, sale and distribution for Ranitidine. While the expert panel and DTAB can only deliberate on the issue and submit their recommendation to the apex authority. The final decision lies with the DCGI. In the past as well, similar claims have been brought forward to the drug authority. However they were not fully convinced that the purported risk associated outweighed the benefits that the medicine provided. It is pertinent to note that in the recent expert panel report 21 of the 42 samples tested exceeded accepted NDMA levels. It is unclear which products failed this test and hence a blanket ban for the product would not be prudent. Additionally, chronic products such as metformin can generally cause NDMA contamination (link) and are still prescribed.

However, Rantac is usually prescribed as an acute product. Therefore NDMA contamination from continuous use of the product would be unlikely. In conclusion, given the lack of clarity on which products failed the test for permissible NDMA levels, acute usage of Rantac and greater benefits vs. risks, JM Financial believes a ban on ranitidine products would be unlikely. Rantac, JB Chemical's ranitidine product, is a key brand for the company. In a worst case scenario of a complete ban on the product, the company's FY26/27 revenue could be impacted by 5-6% and EBITDA by 4-6%. To salvage the impact of Rantac, JB Chemicals could introduce Famotidine (alternate to Ranitidine) products under the Rantac brand. There is precedent for companies switching molecules under similar brand names. For example Sanofi promoting Avil Nu (Cetirizine) over Avil (Pheniramine).

Promoter/FII Holdings
Promoters held 47.84 per cent stake in the company as of 31-Mar-2025, while FIIs owned 18.3 per cent, DIIs 18.71 per cent.