Buy Granules India; target of Rs 665: Motilal Oswal

Motilal Oswal's research report on Granules India

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. However, reduced off-take of intermediates (PFI)/API impacted the overall growth for 3QFY25. GRAN has taken comprehensive initiatives to address issues highlighted by the USFDA at its Gagillapur site. Further, it continues to develop products in CNS/ADHD and oncology segments.

Outlook

We cut our earnings estimates by 8%/6%/6% for FY25/26/27 factoring in: 1) ongoing remediation measures that resulted in calibrated production from the Gagillapur site, 2) marginal addition in costs related to the failure to supply and higher air freight, and 3) additional opex related to the Genome Valley. We value GRAN at 19x 12M forward earnings to arrive at our TP of INR665.