Granules India Ltd. share price target

Granules India (GRAN) delivered better-than-expected revenue, while EBITDA/PAT stood in line for the quarter. The traction in finished dosage (FDF) remained robust for six quarters now.

Granules revenue missed our estimate due to a significant decline in API and PFI sales. EBITDA missed our estimate due to higher-than-expected employee expenses.

Revenues stood at Rs. 957 crore, falling 19% y-o-y and 18% q-o-q, falling 5% short of our estimates.

Granules India (GRAN) was issued a Form 483 with six observations for its Gagillapur site after a recent USFDA inspection.

GRANULES is expected to continue to see strong growth in FDFs with growth in new products; partially offset by continued weakness in APIs with higher channel inventory for Paracetamol APIs in regulated markets.
We expect the company to clock in 14.0% and 33.3% CAGR rise in revenue and net income, respectively, over FY24-FY26E (vs. 13.4% and 30.2% CAGR rise seen over FY24-FY26E earlier).

Granules India (GRAN) posted in-line revenue in 1QFY25. However, it delivered better-than-estimated 1QFY25 EBITDA/PAT led by the increased share of formulation sales.

We reiterate a Buy on Granules as the company is focusing on value-added products to increase its EBITDA margins to 22% plus from 19% in FY24.

Granules' Q4FY24 performance fell short of our expectations by 15.2%/10.6%/23.0%/36.2% on Revenue, Gross Profits, EBITDA and Net Income fronts, majorly due to far higher fall in APIs and PFI sales and stronger performance in FDFs than anticipated.
Hence, we cut down our EPS estimates by 16.0% and 8.0%, for FY25E/FY26E, respectively

Granules India’s revenue has increased at a flat pace of 0.8% Y-o-Y (-2.9% Q-o-Q) to Rs. 11,556 Mn for Q3FY24 (vs. our estimate of Rs. 12,379 Mn, miss by 6.7%) The miss was due to lower than anticipated growth in API sales (19% of revenue, miss by 48%). API sales decline was due to reduction in paracetamol formulation prices, which has followed reduction in the prices of its key starting material (KSM).