Dec 09, 2016 04:20 PM IST | Source:

Buy Granules India; target of Rs 134: GEPL Capital

GEPL Capital is bullish on Granules India has recommended buy rating on the stock with a target price of Rs 134 in its research report dated December 09, 2016.

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GEPL Capital's research report on Granules India

In last five years, company’s revenue & profitability has grown at a CAGR of 25% & 42% respectively. Also, operating margin during the same period was improved from 12.3% in FY12 to 19.9% in FY16 due to favorable product mix. Moreover, company’s current debt to equity ratio stands at 0.85. Also, company’s ROE has also improved from 12.9% in FY12 to 18% in FY16 due to superior profit growth. Further in order to boost future growth, company currently incurring capex worth Rs 300cr each over FY17 & FY18 for green field as well as brownfield expansion & expects debt requirement for above purpose could be minimal. Going ahead, management expects double digit growth in revenue as well as profitability.

At CMP of Rs 112, GIL trades at 16.0x its FY17E EPS of Rs 7.0/- We believe, substantial product approval, greater traction in Auctus Portfolio & higher realization in Omnichem JV to boost GIL growth going ahead. Hence, we recommend BUY rating on a stock price with a target price of Rs 134/-, thus implying 20% upside from current level.

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