JB Pharma Q4: Net Profit Surges 43% to Rs.126 CR
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00:00 Hello and welcome to NDTV Profit. You are watching Earnings Edge and I am your host
00:11 Varsha Chandranani. JB Pharma is in focus today. Company reported its Q4 FY24 results.
00:17 Well, to discuss the results, I am joined by Mr. Nikhil Chopra, who is CEO and whole
00:22 time director of the company. Welcome to the show Nikhil.
00:26 Thank you Varsha. Good to be on NDTV Profit. So, if you see the numbers, so revenue growth
00:33 is 13% while this was in line with the estimates, good uptake in EBITDA margin, net profit is
00:39 up 43%. So, what were the reasons behind this growth?
00:45 So, if you look at overall performance, it has been an all-round outperformance in terms
00:55 of market growth, EBITDA growth and profitability. Market growth was backed up by more what we
01:01 are trying to do in India, where India business overall per quarter floor grew at 22%. But
01:08 if you look at organic, outside the Octel deal that we did last to last quarter, the
01:13 organic growth was 13%. And more of this 13% growth was driven by volume and volume was
01:19 more happening in the chronic space, particularly in cardiology, where today we are the 8th
01:23 ranked company and the fastest growing company. That is where we stand. And if you look at
01:28 EBITDA growth and EBITDA margins, EBITDA growth was close to 16%, 20% and your profitability
01:37 also was as high as 43% growth. Our EBITDA to profit is as high as 85% because we run
01:47 a tight ship in terms of capex, in terms of our spans, in terms of efficiency program
01:52 and our gross margins for the company were as high as 65% for the quarter. As compared
01:57 to here, the gross margins were 66%. Our South Africa business where we have taken a haircut
02:03 for last four quarters and first quarter of this financial year also we will suffer some
02:08 dip in the value, but overall our margins have gone up. Our mix of products have improved
02:14 in terms of what we are trying to do in India. Our CDMO business for the quarter also across
02:19 100 crores where our margins are good. So all this put together, overall outperformance
02:25 for the quarter and also for the year, we are very much happy and satisfied in terms
02:30 of what we are able to deliver. So this increase in margin, we did 23% of margin versus 21%
02:38 last year. So as you said, this was mainly because of change in product mix. Now, where
02:42 do you want to take this margin going forward? So Varsha, you are talking of absolute margin.
02:49 We as a company, when we give commentary, we talk of operating margins. Our operating
02:54 margins were as high as 26% and the guidance that we are giving for operating margins for
03:00 the coming year is ranging between 26 to 28%. That is where we stand and this will be aided
03:06 by our overall enhancing our overall mix in India, which will be once again what I shared
03:13 earlier was cardiology chronic space. Our CDMO business, which absolutely delivered
03:23 100 crores for the quarter in second half, that is October onwards, you should see this
03:28 business growing at mid-teens. That should also overall help. And equally, our South
03:34 Africa business, where we have seen a good jump in our margins for the current year in
03:42 terms of the mix of business that is improved. Our private contribution mix was as low as
03:48 40%, which has jumped to 70% over the last couple of years, the efforts that we have
03:53 made, getting into new therapeutic segments in private market, tying up with disk and
03:59 other chains in South Africa. So all that has helped us in terms of overall improving
04:05 our margins in South Africa. And equally, also happy to share, and this is happening
04:10 in PAN company, whether it is on productivity in the field, which is now as high as 7 lakh
04:15 rupees per month, which has almost doubled as compared to where we were four years ago.
04:22 Or what we are trying to look at improving our increasing our batch sizes in our manufacturing
04:27 plants for our big products, which will only help us to be more efficient. Equally looking
04:34 at better vendor management. So enhancing the productivity PAN company, that is what
04:38 we are trying to do and bring savings which will help us to reinvest in the business.
04:43 So this overall will help us to be between 26 to 28% operating EBITDA margins, pre ESOP
04:50 cost.
04:51 All right. And I just wanted to know about your Opto portfolio. So how was growth there
04:57 now that integration would have been smooth? How are you seeing this going forward? And
05:03 I'm assuming this will aid your margin going forward.
05:09 Unfortunately for next couple of years, it will not aid the margins. We will see 100
05:13 bps plus dip in the margins because the margins currently with this Opthel business are low,
05:20 are thin. Just for you to understand, you and the audience to understand the deal that
05:24 we have done. This is a market income distribution agreement that we did with Novartis for their
05:31 Elkon Opthel portfolio. And this is what we have got around 10 brands, out of which 5
05:41 products are in the world of glaucoma, which are leaders in their space. Equally, we have
05:45 got portfolio in the world of pain, antibiotic, anti-allergic, all put together close to 160
05:51 dollar revenue with thin margins. January 27, we pay Novartis $115 million, 1000 crores,
05:59 and we get perpetual license. And the margins surpasses company EBITDA margins at that moment
06:04 of time. Cross margins surpasses company gross margins at that given time. So thin margins
06:11 go as high as 70-75% in January 2027 as we pay Novartis $115 million for perpetual license.
06:21 So couple of years, we may see 100 bps point dip. But from a marketing perspective, Opthelmology
06:28 as a market is 4000 crore in the country today, which is going at 14%. And 160 crore revenue
06:33 that we got from Novartis Elkon, we intend to grow it better than the market growth.
06:40 The market growth is 14%. And unfortunately, this portfolio for last couple of years was
06:44 flat or degrowing. So in first year only, we'll be able to grow this portfolio better
06:48 than the market. We 65 people from Novartis on the field have joined. And today that within
06:57 couple of months, we have added around close to 135 people. So we have a team on the ground,
07:02 which is 100 plus medical reps, and India coverage. It's a smooth transition and best
07:09 in class execution that JB is known for that is what we have put in place. So the intention
07:14 is to grow better than the market. Also, at some given time, you will see us enhancing
07:17 the portfolio more we will be today our portfolio is more in the world of glaucoma, pain, antibiotics,
07:23 anti allergics, we will be launching portfolio for dry eyes, we'll be getting into antioxidants
07:27 for ophthalmology. Equally at some given time, you will see us partnering and in licensing
07:32 for some biological products in the world of ophthalmology for some for some serious
07:39 elements that is how we are placed today in ophthalmology and we are very much bullish
07:44 in terms of what we have acquired and what we intend to do with this entire range of
07:48 products. And also on your CDMO business, if you see, it cross almost 100 crores as
07:56 guided by you. Now, what was the reason for the same? And the most important question
08:01 is where you want to see this business what contribution to top line CDMO business can
08:06 make in maybe FY 25 and FY 26. So what shall we started this journey at JB three years
08:14 ago three and a half years ago CDMO business was contributing around 5% of the revenue
08:19 $10 million. Three and a half years, CDMO is today contributing 12% of the revenue $50
08:25 million. So from 10 the journey has been $50 million. A lot of a lot of hard work has happened
08:31 in terms of engaging with new partners, continuation the relationship with the existing partners
08:36 getting into new therapeutic segments within Los Angeles. Predominantly, our Los Angeles
08:41 are the CDMO business 70 to 80% of business happens in the world of Los Angeles and predominantly
08:47 our presence is in the world of cuff and pull. We manufacture some market products for some
08:52 big big consumer players across the globe, entire business version happens outside India.
08:57 So $50 million business in the world of CDMO 70 to 80% happens in the world of Los Angeles.
09:03 Now from here, this $50 million business, we want to take it to $100 million in three
09:08 to five years from here. The capacity that we have to manufacture Los Angeles is as high
09:15 as 2 billion Los Angeles annually. And last couple of years we have been manufacturing
09:19 1 billion Los Angeles. Last to last year, this business almost doubled. This year, this
09:23 year, we could work around single digit. But as I shared earlier, in second half of the
09:29 year, you should start seeing a meeting growth and from there onwards, you should start seeing
09:34 high teams growth in this business of CDMO, which will be predominantly happening in the
09:38 world of Los Angeles. We are trying to get into Los Angeles for sleep disorders, Los
09:42 Angeles for pain, Los Angeles for immunity. And we are trying to get into new geographies
09:48 like Europe, Mexico, Brazil, all those markets. Our today presence is in Australia, New Zealand,
09:55 Canada, South Asia, Middle East, that is where our Los Angeles go. And we manufacture only
10:00 branded Los Angeles. That is where we stand. So this is overall what we want to do in the
10:04 world of CDMO. And we are blessed to be to have this portfolio with us and capacity or
10:10 as good and overall as good partners and good products.
10:14 Well, Mr. Chopra, my last question to you before I let you go, considering your CDMO
10:20 business, your domestic business and international business, where do you I mean, have you set
10:26 any target for FY25, overall top line target that you want to see in FY25?
10:34 So I will talk you short term FY24 target and overall midterm what we are what we want
10:40 to do. Let me talk about first FY25 as a guidance. We intend to grow our India business, CDMO
10:46 business and ROW emerging market business. India business is 250 million dollar, CDMO
10:53 is 50 million dollar and ROW is 50 million dollar. We intend to grow these businesses
10:58 at 12 to 14 percent outside the OPTHEL deal that we have done. OPTHEL will be additional.
11:03 That is point number one. Russia, US, South Africa, we want to grow at high single digit
11:08 as high as 8 to 9 percent. That is what we want to do in terms of top line growth. EBITDA
11:13 growth 16 to 18 percent. That is what you will see us growing in terms of EBITDA and
11:19 EBITDA margins, operating EBITDA margins 26 to 28 percent. This is short term. You should
11:24 see this happening in the world in FY25. If you look at mid to long term, India is contributing
11:31 53 percent of the revenue to 250 million dollar close to 2000 crores. This 53 in a couple
11:37 of years should be as high as 60 percent overall to the revenue that we will be doing. That
11:43 is what we want to do. And CDMO, which is contributing 12 percent of the revenue, which
11:47 is 50 million dollar in next three to five years, we want to take it to 100 million dollars,
11:51 which will be contributing 20 percent of the overall revenue. So India plus CDMO should
11:57 contribute between 75 to 80 percent to the overall revenue of the company. And that is
12:02 where we will invest time, money, effort and energy. Also, last but not the least, is rest
12:08 of the world emerging market, where for the first time last year, we have done the filing
12:12 of 10 products which are more progressive in nature, Flozins, Liptons, Opthermology,
12:16 that failure product, that is what we did. This year also, you should see us filing 10
12:20 more products and next year also we will be filing 10 more products. Today our portfolio
12:24 in rest of the world emerging market, which is 50 million dollar business is more commoditized.
12:30 We are not able to take price increases. Though the cost of the API, the cost of doing business
12:34 is going up. But unfortunately, we are not able to take the price increase because the
12:37 market is highly competitive. But eventually, with the progressive portfolio, which we are
12:44 doing, we are doing B-filings, probably FY26 onwards, you should see us probably launching
12:49 new products, where we will be getting better margins, better pricing and it will overall
12:53 once again help us to reinvest in the business. But India and CDMO are going to be the two
13:00 strong legs which will contribute 75 to 80 percent of the revenue in the coming time.
13:05 Well, that's great, sir. Thank you so much for answering our questions and all the best
13:11 for your business. Thank you.
13:14 Thank you.
13:15 Thank you.
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