J. B. Chemicals & Pharmaceuticals Limited (506943) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to the JB Pharma's Q2 FY '26 Earnings Conference Call as on November 12, 2025. [Operator Instructions] I now hand the conference over to Mr. Jason D’Souza, Executive Vice President at JB Pharma. Thank you, and over to you, sir.

Thank you, Sagar. Welcome to the Q2 FY '26 earnings call of JB Pharma. We have with us today, Nikhil Chopra, CEO and Whole-Time Director; Kunal Khanna, President Operations; and Narayan Saraf, the CFO at JB Chemicals & Pharmaceuticals Limited. Before we begin, I would like to state that some of the statements in today's discussion may be forward-looking in nature and may involve certain risks and uncertainties. A detailed statement in this regard is available in the Q2 FY '26 results presentation that has been sent to you earlier. I would like to hand over the floor to Mr. Nikhil Chopra to begin the proceedings of the call and for his opening remarks.

Thank you, Jason, and welcome to all of you on today's call. JB Pharma delivered another quarter of a good performance with the business going ahead of Indian pharma market. Quarter 2 saw overall revenues at INR 1,085 crores, which is 8% higher than the previous year. Operating EBITDA excluding noncash ESOP came in at INR 319 crores, up 12%. And net profit was reported INR 208 crores, which grew at 19% year-on-year. Our quarter 2 FY '26 gross margins increased by 200 bps to 68.2% versus 66.2%. Cost optimization efforts, favorable product mix and price growth positively impacted gross margins. Operating EBITDA margin came at 29.4%, up 100 bps year-on-year, underscoring emphasis on improvement in profitability. Moving along, let me draw the discussion towards the domestic business. Our domestic business grew. Business showed a 9% improvement year-on-year to INR 644 crores. As per IQVIA September MAT data, JB Pharma is the fastest-growing company among the top 25 companies in IPM. Over the past several years, we have consistently remained one of the fastest-growing companies in the country. This is indeed a major achievement for our organization as a whole. Further, all our major brands gained ranks, with 3 of our brands now in top 100 brands in IPM. We have now 6 brands in top 300 in the IPM. The business continues to be driven by strong brands with key franchises outperforming the market. As for IQVIA MAT September '25 data, the Razel franchise, that is rosuvastatin franchise, has crossed INR 100 crores in revenue. This is another achievement considering that in just 2 years, the franchise has grown from sales of INR 66 crores in MAT September '22 to INR 104 crores as per MAT September '25 data. We now have 6 brands franchises each demonstrating healthy and sustained growth. Moving on, let me address our international operations. Quarter 2 FY '26 saw the business delivering 7% improvement year-on-year to INR 441 crores. This was driven by strong trends in our CDMO segment. CDMO business reported 20% year-on-year growth to INR 113 crores for the quarter. We have a robust pipeline products lined up for our global partners and our order book remains strong for H2 FY '26. International formulations reported a revenue of INR 306 crores, up 2%. Russia market recorded strong growth for the quarter, whereas our other markets stayed subdued. We expect growth to return in H2 FY '26. More of that we'll talk in our Q&A. Friends, JB remains steadfast in advancing revenue growth while deepening its focus on the cost discipline and organizational agility. Our continued emphasis on the domestic and CDMO segments will be instrumental in sustaining both top line expansion and margin strength. With a resilient balance sheet and a culture rooted in executional excellence, we are poised to navigate the future with confidence and steer the company into its next phase of strategic growth. I would now like to request Mr. Narayan Saraf, our CFO, to continue with his views on the financial performance. Over to you, Narayan. Thank you.

Thank you very much, Nikhil. Good afternoon, everyone, and welcome to JB Pharma's Q2 FY '26 Earnings Call. Now to take you through the financial updates for the second quarter. Revenues for the quarter were at INR 1,085 crores, representing an increase of 8% year-on-year. The domestic business to international business mix was 61%-39% for H1 FY '26 versus H1 FY '25. The domestic business formulation business segment reported revenues of INR 644 crores with a growth of 9% year-on-year. And as per IQVIA MAT September '25 data, within the IPM, the company maintained its outperformance with a growth of 12% versus IPM growth of 8%. In international business, the segment reported a growth of 7% year-on-year at INR 441 crores. International formulations grew moderately by 2% year-on-year to INR 306 crores, and the CDMO category grew strongly, recording an increase of 20% year-on-year at INR 113 crores due to good sales momentum. Revenue from the API category were at INR 22 crores as against INR 19 crores in the previous year. Operating EBITDA, which is excluding noncash ESOP, grew by 12% to INR 319 crores for Q2 FY '26. Operating EBITDA margins increased by 100 basis points to 29.4% for Q2 FY '26. For H1 FY '26, operating EBITDA, excluding one-off impact in Q1 of INR 15 crores due to merger scheme, grew by 13% to INR 649 crores. Operating EBITDA margin was 29.8%, an increase of 110 basis points as compared to H1 F '25. Gross profit margin grew to 68.2% compared to 66.2% in Q2 FY '25. Cost optimization efforts, favorable product mix and price growth aided the margin improvement by 200 basis points Overheads including employee costs were contained, which also aided operating margins. Finally, net profit increased by 19% to INR 208 crores for Q2 FY '26 and increased by 17% to INR 410 crores for H1 FY '26. Excluding one-off impact due to merger scheme, net profit for H1 grew by 20% to INR 421 crores, an improvement of 180 basis points. The operating cash flow in H1 FY '26 were at INR 363 crores. Cash tax increased to INR 116 crores. The company's gross debt as of September 30, '25 was at INR 7 crores versus INR 14 crores as on March 31, 2025. Net cash and cash equivalents, including investments in mutual funds, were at INR 939 crores as on September 30, '25. The net CapEx addition for H1 FY '26 was INR 46 crores versus INR 49 crores in H1 FY '25. We remain confident on a positive outlook through opportunities for the company and providing value to our stakeholders. That brings to my end of my opening remarks. I now request the moderator to open the forum for the Q&A session. Thank you very much.

[Operator Instructions] Our first question comes from the line of Tausif Shaikh from BNP.

My first is on the domestic business. Just want to check whether our domestic business was impacted to the new GST rates. And can you help us provide the growth of acute and chronic growth for this quarter to help this thing better?

With respect to GST, the business was not impacted at all. Whatever numbers you see are without any significant impact on channel as far as GST implications go. Overall, our growth has again outpaced the market. If you really look at Q2 numbers, the volume growth for the market was in the range of 0.5% to 0.7%, whereas our volume growth was close to 4%. And we have always kind of maintained that the reason why we'll be able to grow above the market is because we'll grow at least 3 percentage points above the market with respect to volume growth. And that trend continues to maintain. Acute season was slightly muted, which has impacted our overall domestic growth for Q2, mainly impacting products like Metrogyl and Rantac. But beyond that, our chronic growth has been significant. In fact, our chronic portfolio has grown at over 20%. Some of our key brands like Cilacar, Cilacar-T, Cilacar plain has grown at almost 14%, Cilacar-T continues to grow at 26%. Our Sporlac franchise has grown at 15%. Azmarda is growing at 23%. So all our big franchises on the chronic segment are actually growing at 20% plus.

That's helpful. Second question is on the export formulation. I think this is the second consecutive quarter we have seen a muted growth. Which of the markets which are leading this drag to this kind of growth? Can you help us understand?

So if you look at overall our performance in the international market, let me first talk about which markets got us the growth. CDMO grew at the pace of 20% for the quarter. And equally, Russia business demonstrated a good growth of 20%, close to high teens for the quarter and H1. Rest of the world and South Africa, they showed a muted growth. But what we would like to state here is that we have a good order book for rest of the world, and we should see high single-digit growth in H2 in the rest of world market. And South Africa also will bounce back, supported by the growth will continue to happen in CDMO and Russia.

Our next question comes from the line of Alok Dalal from Jefferies India Private Limited.

Sir, just two questions. First is, for the quarter, we've seen India growth of 9%. This is slightly slower than previous quarters. Is it largely because of seasonality?

Yes. As we maintained earlier, largely because of acute season slightly be muted. Last year, the overall acute season was quite positive for us and Metrogyl as a franchise had also grown. So it's an impact of a slightly higher base for some of these key legacy products. It's just a seasonal variation. If you compare overall volume growth and if you see the chronic trends, we continue to outpace the market.

And Alok, we'll continue to grow. Alok, Nikhil here. Like what Kunal had told, we'll continue to outpace the market. And as compared to IPM, we'll continue go to grow by 300 to 400 bps better.

Okay, sure. And can you split the growth between volume, price and new introductions?

Sure. If you really look at it from a Q2 perspective, as reflected externally and also in line with our internal trends, overall volume growth is for Q2, 4% and prices, 6%. And overall H1 volume is 5% and the price is 7%. Some part of volume includes our NI, but that's not significant.

Got it. And last question is on field force. What is the current field force strength as of September?

So currently, the MRs are close to 2,400 active MRs operating on the ground. No significant additions over the last 4 to 6 months.

And our productivity is close to around INR 7.5 lakhs.

Okay. Yes. Sir, if I look at the March presentation, so the field force strength was about 2,800. So has there been some attrition, about 300, 400 MRs?

So no. I think that is including the managers, Alok.

Okay. So this is feet on the ground. All right, okay.

Our next question comes from the line of Rashmi Shetty from Dolat Capital.

Again, a follow-up for the export market. You mentioned that South Africa and U.S. have seen some sort of struggle over there. While Russia, which had seen slowdown in first quarter, has seen a good season this quarter and that's why it has picked up. But what exactly in U.S. and South Africa the struggle is? Is it related to any sort of pricing pressure or delayed product launches or anything? If you can give a bit in detail. Though I understand that in the second half we will be recovering, but what is the temporary issue over here?

Yes. If you look at South Africa, over a period of time, we have been diminishing our overall participation in the public market tendering. So that is the reason. And it takes time in South Africa as a market. There, we've been highly relying on public tender, but still -- which was this public tendering participation and the contribution to business a couple of years ago was 65%. Today it has come down to 35% and private has gone up. But we are looking at how do you propel up the growth in private market. So that will come. That we are confident. U.S., no pricing pressure. We don't see any price reduction in U.S. U.S. has been a quarter where our last year base was higher because of some supply would have been on the higher side. But it has been a trend. We do around $10 million to $12 million business every quarter. So I think that growth will bounce back in quarter 3 and quarter 4 for U.S. business. So not a worry.

Okay. And in domestic business, what kind of price hikes we have taken? I mean, the blended price hike for this year, we have already taken it? Or we'll be taking it now?

So it happens product to product based on when the price hikes are due for a particular set of brands. If you really look at our H1 trending, price growth is 7% for our domestic business. For Q2 specifically, it was 6%.

And so we continue to maintain our guidance of 12% to 14% for the domestic market, expecting that the H2 will pick up due to the chronic segment?

Absolutely. As we have always maintained, we will continue to outpace the market. And even if you really look at the volume growth figures compared to the IPM, we continue to be 3 percentage higher than the market volume growth figures. And we'll continue to maintain that. So we will be looking at 12% to 14% growth for our domestic business.

Okay. And last quarter, you mentioned that gross margin guidance would be in the range of 67%. Do you still hold that? Because we are running at 68% now. And similarly, if you can guide on the EBITDA margin, whether you're retaining your guidance of around 27% to 29%.

Yes. On gross margin, we continue to maintain that we would be in that range of 67% to 69%. And EBITDA also, very clearly, we would be in the range of the earlier guidance which we had given. And we continue to see that we are keen to achieve those guidances.

Okay. And just two more questions. ESOP charges, we'll get over by which year? And in case our ophthal portfolio gets consolidated, that is from FY '28, what kind of gross margin improvement or margin we can see? Because our base business itself is now at around 29% EBITDA margin. So how much expansion can we expect from there?

On the ophthal side, and Narayan can take the ESOP question later. On the ophthal side, the perpetual license gets triggered in December 2026. So from calendar year '27, we will see a significant improvement on the overall gross margin profile. We don't want to significantly peg any number or give any guidance. But just to give you a sense, that even our ophthal portfolio, the overall margin profile will be probably higher than our stand-alone domestic business current margin profile as well. So that gives you an indication of what the margin boost will look like.

And on the ESOP charge, we see that the balance charge which is left is approximately INR 47 crores and the year until it which will be charged is FY '27. However, very clearly, we see INR 10 crores getting charged in quarter 3 as per quarter 2.

Okay. INR 47 crores for this year, you are saying?

INR 47 crores is the total remaining charge. INR 47 crores is the total remaining charge.

Okay. And in FY '27, how much will you charge it?

So in FY '26, we see clearly around INR 20 crores, and balance INR 27 crores would be in FY '27.

Okay. And one last question on the inventory days. In the presentation, you mentioned that the inventory levels have been increased. So will it get normalized at the end of March quarter? Or it will remain elevated only to build your ophthal inventory and also just to mitigate the risk of high API costs?