Buy Granules India; target of Rs 680: Motilal Oswal

Motilal Oswal's research report on Granules India

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 as well as a higher contribution from new launches. We tweak our earnings estimate by +2% for FY25 to factor in the steady traction from new launches and a weak outlook in the paracetamol business owing to higher API inventory at the industry level. We value GRAN at 18x 12M forward earnings to arrive at our TP of INR680. In addition to the shift towards higher formulation sales from its legacy molecules, GRAN is implementing efforts to: 1) build a pipeline in the space of oncology, large volume products, and innovation/tech-based products (enzyme/contract manufacturing), and b) backward integrate the manufacturing process of its legacy products. This augurs well for sustaining the earnings growth momentum beyond FY26 as well. Reiterate BUY.

Outlook

We tweak our earnings estimate by +2% for FY25 to factor in the steady traction from new launches and a weak outlook in the paracetamol business owing to higher API inventory at the industry level. We value GRAN at 18x 12M forward earnings to arrive at our TP of INR680.