Buy JB Chemicals; target of Rs 150: Bonanza

“JB Chemicals and Pharmaceuticals (JBCPL) manufacture API, Contrast Media products used in radio diagnostics and Formulations. It has significant presence in Russia, CIS and Romania. It is planning to increase its presence in regulated markets like USA and Europe. JBCPL has an associate company in South Africa.”

“JBCPL has a strong base of 11 state-of-the-art manufacturing units (including three US FDA approved Tablet & API plants). The plants have approvals from several countries including UK, Germany, Australia, Brazil and South Africa. It is poised to become significant generic player in the US market as it recently got FDA Approval for its ANDA for 25 mg. and 50 mg. tablets of Diclofenac Sodium. With this new approval, JBCPL now has full range of drug formulations to offer in US market which can improve its margins substantially. Recent new launches include Ultrasound Contrast Imagining product (‘Definity’) of a US company. CRAMS projects continue to be growth drivers. JBCPL has successfully commercialized 3 projects awarded by foreign companies and 3 more are under implementation.”

“An investment of Rs 40 crore is being made by the company in manpower, new marketing & R&D initiatives and modernization of facilities which will help in the business growth. The shares of JBCPL are available at a reasonable valuation. The PE multiple on TTM basis works out to 8.70 and on the latest quarter results works out to 7.40 (annualized). 52% of the Company’s revenue comes from exports. Foreign exchange movements affect company’s overall margins. The markets are likely to become more competitive. Pay off from R&D expenses takes long time Investors can buy the scrip at CMP for a target of Rs 150,” says Bonanza research report.

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