With the generic version of Focalin XR being approved, GRAN now has 30 ANDA approvals (28 final and 2 tentative). It is used for the treatment of Focalin XR and its generic equivalent had US sales of USD556m for 12- There are 5 companies having final approval for this product, other than GRAN. Accordingly, we expect price erosion of 7-10% with market share gradually building up to 10% over 12 months post the launch of the product. This could provide meaningful upside to GRANs ANDA-led Formulations GRAN has multiple growth levers, such as (a) the ANDA pipeline for US generics (with some products having limited competition opportunity), which should drive an increase in the share of formulations for developed markets, (b) enhanced reach for core molecules, and (c) reduced opex through backward integration.

Granules (GIL) posted revenues of INR 7,356mn with 23.6% YoY growth, which was ~6% above our estimate of INR 6929mn. Revenue growth was mainly driven by new product launches and an increase in market share of existing products. Gross margin improved (918bps YoY) due to higher formulation sales (52% of revenue vs 48% in Q1FY20). Subsequently, EBITDA margin expanded by 503bps to 25% level was 475bps higher than our estimate. EBITDA was partially impacted by one-off INR 280mn related to metformin recall (INR150mn) and COVID-19 related expenses (INR130mn). As per management EBITDA margin can be sustainable (~23% for FY21) as continued traction in the formulation business. GIL reported PAT of INR 1114mn, was above our estimate of INR 744mn driven by strong operational performance and lower tax rate (25.3% vs 32% in Q1FY20). Management expects to achieve 30% PAT growth in FY21 compared previous year and 25% for FY22 given the strong traction in base business along with new product launches in the US generics business. Post...

Granules achieved its highest ever quarterly revenue of Rs.736cr during Q1FY21 with a YoY growth of 24%. The Finished Dosages segment grew by 35% during the quarter as the company successfully launched Colchicine tablets and Butalbital APAP caffeine tablets in the U.S The company reduced its Promoter pledge percentage from 37.6% to 8.7% through the recent buyback process. We expect net profit to grow at a CAGR of 22% over FY20-FY22E on...

18 July 2020 Post delivering spectacular earnings growth (76% YoY) in FY20, Granules Indias (GRAN) posted strong revenue/EBITDA/PAT in 1QFY21. This was led by new launches in formulations (FDs) and better market penetration for intermediates (PFIs). We have raised our EPS estimate by 12%/6% for FY21/22E to factor in (a) the increased FD business on account of ANDA launches in the US, (b) addition of new molecules in the API segment, (c) increased traction in existing products, and (d) improving profitability due to backward integration. We value GRAN at 14x 12M forward earnings to arrive at price target of INR315. GRANs 1QFY21 sales were up 23.6% YoY to INR7.4b (v/s est. INR6.7b), led by 35% YoY growth in FDs (INR3.9b; 52% of sales) and 45% YoY growth in intermediates (INR1.4b; 19% of sales). API sales (29% of sales) declined moderately by 1% YoY, affecting overall growth to some extent. Adjusting for the same, Gross Margin (GM) for the company stood at 60.3% and expanded 990bp YoY, led by larger share of FDs and PFIs.

Weak demand coupled with logistic/Supply chain issue lead to Muted Quarter We expect the companies under our pharmaceuticals coverage to report flattish revenue growth in Q1FY21 with 14.2% decline in profitability, on account of weak domestic business, negatively affected by COVID-19 lockdown. The US business is likely to remain moderate on account of reversal of benefits of stocking at the wholesale level in Q4FY20, lower sales from seasonal products (gTamiflu, speciality products of Sun Pharma) and weak demand for injectables (Aurobindo) due to sharp drop in patients visiting physicians and hospitals. However, companies with higher exports will benefit due to appreciation in the USD-INR by ~5% QoQ. With respect to domestic markets, the growth is likely to favour companies with a larger presence in chronic therapy despite lockdown led restrictions....

For FY20, total revenues grew by 14% as the company launched 5 new products in the U.S which have gained traction. The share of revenues from FDs have grown from 44% in FY19 to...

Granules (GIL) posted revenues of INR 5,999mn with 2.2% YoY decline, which was ~14% below our estimate of INR 6945mn. Revenue growth was mainly impacted by the restriction imposed on export of Paracetamol API, PFI and FD's (which was uplifted for PFI & FD's in the month of April and for the API in the month of May) and disruption in logistics (revenue loss of INR600 to700mn). However, post lifting of restriction on the export of paracetamol, capacity utilization has improved significantly now. Gross margin improved (754bps YoY) due to higher formulation sales (57% of revenue vs 52% in Q4FY20). However, EBITDA margin expanded by barely 75bps to 16.7% level was 279bps lower than our estimate due to higher employee cost (up 43.8%) and one time INR 217 Mn impairment of...

Outlook and Valuation. Its dominance in key APIs (paracetamol, ibuprofen, metformin) would help Granules emerge a prime beneficiary as the Covid-19 outbreak has led to a surge in demand for such drugs. Granules is likely to retain strong traction for the next couple of years driven by formulations and the healthy contribution from new capacities. We expect ~25%/~23% revenue/PAT CAGRs over FY20-22. At the CMP, the stock trades at 9x FY22e EPS of `20. Risks: 38% of promoters' holdings have been pledged;...

Granules India Ltd. (GIL) continue to deliver strong earnings in Q3FY20. Revenue growth was marginally below expectation while EBITDA improving further. Revenue grew by 11.4% YoY to Rs. 704 cr in Q3FY20 due to increased contribution from regulated markets along with higher contribution from Pharmaceutical Formulation Intermediates (PFI) (up 8% YoY) and Finished Dosage (FD) (up 23% YoY). Geographically, North America (up...

Q3FY20 revenue grew by 11% YoY driven by higher sales in Formulations (FD) (~23%YoY) segment and PFI (Pharmaceutical formulation Intermediaries )(~8%YoY). EBITDA registered a 44% growth YoY while margin improved by 300bps to 23% on account of better capacity utilisation which is also reflected in the PAT growth of 59% YoY. Recognized an impairment loss of Rs 32crs in Q3FY20 on sales of joint venture (JV) business Biocause (China) which will be offset in...

Granules (GIL) posted revenues of INR 7040mn with11.4% YoY increase, which was 5% below our estimate of INR 6,337mn. Revenue growth was mainly driven by Formulation (FD) (23% YoY growth) segment, led by new product launches and better pricing in existing products in the regulated market. EBITDA margin expanded by 524bps to 23.2% level was 388bps higher than our estimate due to 755 bps improvement in gross margin led by improved product mix. During the quarter the company charged one time exceptional item of INR 320mn provided for impairment in Biocause. Adj. to exceptional item, PAT came above our estimate at INR961mn (est INR798mn) driven by the operationally superior performance. R&D; spend was at 3.2% during Q3FY20, 101bps higher than last year same quarter. GIL's board approved buy back of 12.5mn (4.92% of equity capital) shares at INR200 per...

21 January 2020 GRAN is on a sustained earnings growth trajectory, led by higher business from forward integration, expanding its portfolio and reach. We raise our EPS estimate by 6.5%/7.3%/2.2% for FY20/21/22 to factor in (a) increased formulation business on account of ANDA launches in the US and (b) improving profitability due to forward integration and addition of higher- margin API molecules in the portfolio. Reiterating Growth was mainly driven by strength in the formulation dosage (FD) segment (+23% YoY; 54% of total sales). Gross margin expanded 750bp YoY to 50.7%, led by the higher share of formulation revenue. 20.2%), partly offset by higher other expenses (+160bp YoY) and staff cost (+70bp YoY). Strong EBITDA growth and a lower tax rate led to PAT growth of 56.4% YoY to INR944m (our estimate INR876m). GRAN reported one-time provision charge for impairment of INR320m related to the divestment of Granules Biocause Pharma, resulting in lower reported PAT of INR641m.

We recently met the management of Granules India - A vertically integrated pharmaceutical company focused on exports to regulated markets -North America, EU and LATAM. The company has organized its business into 3 broad divisions Core Focus Molecules, US Generics and Onco/Multi API. The Core Focus Molecule business is built around 8 molecules which are Ibuprofen, Paracetamol, Metformin, Methocarbamol, Guaifenesin and three newly launched molecules Losartan, Cetrizine and Fexofenadine. The Company manufactures/sells these molecules in all formats - APIs, PFIs, and FDs. About 80% of the FY19 revenue (Rs22,792mn) came from the core products. US generics comprise 20% of the revenues and it is still scaling up...