Date of report Monday, May 19, 2008

Company JB Chemicals & Pharmaceuticals Ltd - Quick & Dirty Analysis

Analyst Dhananjayan J

Contact dhanan12@yahoo.com
& Dirty Analysis
Table of Contents (Please enable the macro attached to this file)

Fact Sheet >>

Quick & Dirty Analysis >>

Disclaimer >>
Fact Sheet

JB Chemicals & Pharmaceuticals Ltd

J. B. Chemicals & Pharmaceuticals Ltd. (JBCPL), known to many as Unique Pharmaceutical Laboratories is one
of India’s leading global pharmaceutical companies. The company manufactures and markets a wide range of
pharmaceutical formulations, herbal remedies, bulk drugs, intermediates and radio-diagnostics.

Website http://jbcpl.com/index.html

Special situation Buyback

Pro forma valuation

Price ratio
Price to earnings 11.8
Price to free cash flow 21.7
Price to tangible book value 0.8

Enterprise value ratio

EV / Sales 0.9
EV / EBITDA 7.9
EV / EBIT 10.7
EV / (EBITDA-Capex) 14.6

Debt and interest coverage

Net Debt / EBITDA 2.8
EBIT / Interest expense 2.8

Yield Ratio
Dividend yield 1.1%
Earnings yield 8.5%
FCF1 yield 4.6%

Return on Assets
Return on operating assets 6.9%
Return on capital invested 8.1%

Operating margins
EBITDA 11.7%
EBIT 8.7%
Net income 5.1%

Depreciation Vs. Capex Capex

The above valuation ratios are computed after assuming buyback in the LTM financial numbers published by the company.
(Refer QAD sheet)

Conclusion
Highly capital intensive business. Capex is more than depreciation. As a result the return on invested capital as well as oper
pharma business is highly regulated one. There may be some unknown risks associated with this business. This is difficult to qu
highly leveraged. Debtors o/s was more than accounts payable. This indicates the poor working capital management. Buyba
the overall valuation. Hence this stock is not good for investment.
Our Verdict: Not interesting - avoid.
 101
91
81
71
61
51
41
31
1 1 1 1 12 2 3 3 4 5 56 6 7 7 8 89 9 1 1 1 11 1 1 1 2 2 34 4 5
1 2 2 / / / / / / / / / / / / / / / / / 0 0 1 12 2 / / / / / / / /
/ / / 8 29 2 1 3 1 4 25 2 5 2 6 26 2 / / / / / / 1 2 1 2 12 2 7

ed capital as well as operating assets are low. Moreover

iness. This is difficult to quantify. Above this company is
pital management. Buyback as catalyst is not enhancing
JB Chemicals & Pharmaceuticals Ltd
(Rs in lakhs)
Pro forma
QUICK & DIRTY ANALYSIS FY 3/07 Buyback 3/07
Net sales 56,240.44 56,240.44
Total growth 7.0% 7.0%
Change in inventories 839.09 839.09
Consumption of raw materials 14,499.16 14,499.16
Purchase of traded goods 5,124.38 5,124.38
Employee costs 9,346.77 9,346.77
Sales promotion & publicity 6,508.54 6,508.54
Other expenditure 13,744.42 13,744.42
Other income - last yr export incentives 400.13 400.13
EBITDA 6,578.21 6,578.21
Margin 11.7% 11.7%
Depreciation 1,690.02 1,690.02
EBIT 4,888.19 4,888.19
Margin 8.7% 8.7%
Interest expenses 1,620.54 1,757.72
Interest exp rate 9.3% 9.3%
Interest income - last yr assumed same this yr 229.87 63.44
Interest income rate 11.3% 11.3%
EBT 3,497.52 3,193.91
Margin 6.2% 5.7%
Tax @ 10% after assuming all SEZ benefits 349.75 319.39
Net income 3,147.77 2,874.52
Margin 5.6% 5.1%
Outstanding shares 843.26 67.55 775.71
EPS INR 3.73 INR 3.71

Total assets - FY 3/07 71,229.27 71,229.27

Investments - non cash 748.62 748.62
Cash 2,038.57 2,038.57
Goodwill 1,690.23 1,690.23
Loans and advances - cash non recoverable 2,715.05 2,715.05
Prelimnary expenses 0.62 0.62
Operating Assets (OA) 64,036.18 64,036.18
Return on Operating Assets 6.9% 6.9%
Cash return on Operating Assets 9.2% 9.2%
Cash return on Operating Assets after capex 5.0% 5.0%

Fixed assets excluding Goodwill 25,021.71 25,021.71

Current assets excluding cash 39,688.39 39,688.39
Current liabilities excluding debt 10,097.39 10,097.39
Invested capital (IC) 54,612.71 54,612.71
Return on Invested Capital 8.1% 8.1%
Cash return on Invested Capital 10.8% 10.8%
Cash return on Invested Capital after capex 5.9% 5.9%

Investment in working capital in FY 3/07 29,591.00 29,591.00

WC as a % on sale in FY 3/08 52.6% 52.6%

Shareholder's Equity - book value - FY 3/07 41,846.20 41,846.20

Tangible Book Value (TBV) 40,155.97 40,155.97
Return on Equity (ROE) 11.0% 11.0%
 Cash return on Equity (ROCE) 14.7% 14.7%
Cash return on Equity after capex 8.0% 8.0%

Capital expenditure - assumption 3,000.00 3,000.00

Notional FCF1 before WC investment 1,837.79 1,564.54
Notional FCF1 / share INR 2.18 INR 2.02
TBV / share INR 50.85 INR 54.97
Cash 2,038.57 1,476.00 562.57
Debt 17,436.73 1,476.00 18,912.73

Price INR 43.70 INR 43.70

Mcap 36,850.61 33,898.61
EV 52,248.77 52,248.77

EV/Sales 0.9 0.9

EV/EBITDA 7.9 7.9
EV/EBIT 10.7 10.7
EV/(EBITDA-Capex) 14.6 14.6

PE 11.7 11.8
P/FCF1 20.1 21.7
P/TBV 0.9 0.8

Net debt / EBITDA 2.3 2.8

EBIT / Interest expense 3.0 2.8

Dividend per share INR 0.50 INR 0.50

Dividend yield 1.1% 1.1%
Earnings yield 8.5% 8.5%
Notional FCF1 yield 5.0% 4.6%
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