NGT slaps notice, JB Chem dips, to approach SC

JB Chemicals & Pharmaceuticals (JB Chemicals) has slid around 12 per cent to hit Rs 240.05 in intraday on the Bombay Stock Exchange (BSE) due to issuance of a court order by the National Green Tribunal (NGT), which has directed closure of its bulk drugs plant at Panoli, Gujarat within a month.

However, as per company’s comment, the plant has valid NOC/consent to operate under applicable environmental laws and is operating well within the framework of law. The company clarified that it has been operating the plant with a valid environmental clearance for this plant from the Union Environment Ministry.

The company plans to challenge the notice in the Supreme Court and it is confident that the  court will grant relief to the company especially in light of various technical aspects.

In FY15, the total sale of bulk drugs manufactured at the said plant amounted to Rs 104 crore. Besides, the company also uses Active Pharmaceutical Ingredients (APIs) produced at this plant for captive consumption. In FY15, the company has reported revenue of Rs 1,144 crore i.e. it will be impacted around 10 per cent of the total revenue.

JB Chemicals, one of India’s leading pharmaceutical companies, manufactures and markets a diverse range of pharmaceutical formulations, herbal remedies and APIs. It exports to many countries worldwide with a strong presence in Russia, Ukraine, CIS countries and South Africa.

For the six months of the current fiscal year, it reported growth of 5.2 per cent in income from operations of Rs 570.99 crore. Exports, which constitute almost 50 per cent of the company’s revenue, grew by just 5 per cent (YoY); domestic formulation business by 6 per cent (Y-o-Y); and API business fell by 12 per cent (Y-o-Y) in H1FY16. EBITDA grew by 22.5 per cent in H1FY16 as compared to the previous year. Net profit grew by 30.7 per cent in H1FY16 as compared to H1FY15.

As far as valuation is concerned, it is trading at a TTM PE ratio of 16.6 and on the basis of price-to-book value it trades at 2 times the value. Therefore we believe the above news will not have much impact from this level. As per market condition stock may remain in underpressure for a short period. Today it has closed at Rs 260.75, lower by 4.86 per cent on BSE.