JB Chemicals Share Price Surges 9% as Kotak Institutional Equities Issues 'Buy' Rating

JB Chemicals share price surged nearly 9% on July 1 after Kotak Institutional Equities initiated coverage on the stock with a 'buy' rating. Kotak projected that the stock will trade at a premium compared to other domestically-focused companies. 

At 12:52 pm IST, JB Chemicals shares were trading 3.3% higher at ₹1,812.90 on the National Stock Exchange (NSE). Year-to-date, the stock has risen by 12%, outperforming the benchmark Nifty 50 index, which has increased by 10%.

The brokerage set a target price of ₹2,025 per share, implying a 15% upside potential from current levels.

Kotak analysts' optimism is driven by JB Chemicals' leading market share across its legacy brand families, the imminent ramp-up of acquired portfolios, robust contract manufacturing organization (CMO) traction, and minimal exposure to the US, EU, and other regulated markets. Additionally, the company's unparalleled execution track record further bolsters their positive outlook. 

Kotak noted that despite the stock experiencing a phenomenal tenfold increase over the past five years, the current valuations of 21 times EV/Ebitda and 33 times price-to-earnings estimates for fiscal 2026 do not fully capture the business's growth potential. 

Currently ranked as the 22nd largest player in the Indian pharmaceutical market, JB Chemical has outperformed the Indian Pharmaceutical Market (IPM) by nearly 600 basis points over the past decade. 

The brokerage anticipates a compound annual growth rate (CAGR) of 13% in organic domestic sales from fiscal 2024 to 2027, driven by strong brands and increased productivity of medical representatives. 

Additionally, the high-margin contract manufacturing organization (CMO) vertical is expected to double by March 2028, supported by a robust order book and increased capacity. 

Kotak projects a 14% compound annual growth rate (CAGR) in sales and a 17% CAGR in EBITDA for JB Chemical from fiscal 2024 to 2027. This growth is expected to be accompanied by a 230 basis point expansion in EBITDA margins, driven by increased domestic productivity and a favorable branded/CMO mix, despite potential margin compression from the Novartis deal.

In the last 12 months, the stock has soared 53%, beating Nifty's returns of 25% during this period.