Granules India Ltd. share price target

We reiterate BUY with a TP of Rs 160 (12x Dec-20E EPS). Coming off a three year capex cycle, Granules India (GRAN) is ripe for returns as the formulations business is seeing a substantial ramp up (+60% YoY in 9M) and the expanded API capacities are set to witness higher realizations post regulatory approvals (3 to 6 months). The company has already beaten our PAT estimates over the last two consecutive quarters and is likely to end the year with more than Rs 9 EPS.

Higher API and FD sales drove the numbers Granules (Inc) is a leading generic player in the Indian pharmaceutical industry with 2/3rd of its revenue generated from North America and Europe and the rest accomplished from Emerging markets like India. Q2FY19 revenue grew by 47% YoY driven by higher sales in API...

At CMP, the stock is trading at 18.6x FY18, 11.6x FY19E and 9.2x FY20E EPS, still 50% cheaper to industry peers. Maintain BUY with a TP of Rs 140 (12x Sep'20E EPS). Continuing the momentum post sequential recovery in the previous quarter, Granules (GRAN) reported strong double-digit growth with revenue at Rs 5.8bn (+48/28% YoY/QoQ) in 2QFY19. This was driven by the API and FDF segments, and three product launches in the US market (gMethergine, Methocarbamol and Metformin XR). EBITDA came in at Rs 1bn with margin at 17.3% (down 230bps YoY/ up 130bps QoQ).

We continue to maintain BUY with a TP of Rs 120 (12x FY20E). Continued growth in API and Formulations coupled with the launch of gMethergine led to 20%YoY growth in revenue, coming up to Rs 4.5bn for 1QFY19. The absence of inventory write-off and one-off R&D; which were seen last quarter along with improved raw material pricing resulted into a 700bps QoQ jump in EBITDA margin to 16%. Other Income was up 52%QoQ largely driven by forex gain to the tune of Rs 110mn.

Granules (Inc) is a leading generic player in the Indian pharmaceutical industry with a 2/3rd of its revenue generated from North America and Europe and the rest accomplished from Emerging markets like India. Q1FY19 revenue grew by 18% YoY due to better performance from enhanced plant capacities and stronger domestic performance. EBITDA registered a 13% growth YoY while margin declined by 300bps to 16.8% on account of higher raw material cost (RM). PAT is up by 23% YoY due to higher other income and Joint venture...

for FY19 means there could be upside risk to our estimates. Extensive capex cycle is nearing an end with asset turnover expected to head higher over the next 2 years with the full impact of capacity commissioning seen in FY20. We largely maintain estimates with FY18-20E EPS CAGR seen at 40%. We maintain our...

Granules (Inc) is a leading generic player in the Indian pharmaceutical industry with a 2/3rd of its revenue generated from North America and Europe and the rest coming from Emerging markets like India. Q4FY18 revenue grew significantly by 39% YoY on incremental sales from newly added capacities while PAT de-grew by 55% on account of higher raw material (RM) cost and one time inventory write off....

Manufacturing cost adversely impacted by transient and non-transient factors RM cost for GRAN spiked due to a combination of supply disruptions for a key ingredient (fire at supplier's factory), higher crude and plant closures in China impacting ingredient supplies. Some of the factors are likely to prove transient, but complete gross margins recovery unlikely any time in the near/medium term. Timing difference means GRAN unlikely to be able to fully pass on cost inflation GRAN has automatic pricing resets for ~50% of its ongoing supplies, but for the balance supplies it has to negotiate with customers. The risk here is that if the price appreciation is...