Motilal Oswal is bullish on Granules India has recommended buy rating on the stock with a target price of Rs 140 in its research report dated January 30, 2019.
Motilal Oswal's research report on Granules India
GRAN's 3QFY19 sales came in at INR6.3b (v/s our estimate of INR5.5b), up ~54% YoY, led by API and formulation (FD) segment. Gross margin (GM) declined by ~600bp YoY (+200bp QoQ) to 43.2%, primarily due to increased competition and higher input costs. Despite sharp contraction in GM, GRAN was able to maintain EBITDA margin at 17.8% (flat YoY; +60bp QoQ) due to better operating leverage. Absolute EBITDA increased by ~53% YoY to INR1.1b (v/s our estimate of INR970m) on back of strong revenue growth. For 9MFY19, profit from JV/associates stood at INR297m v/s INR127m YoY. PAT grew at a higher rate than EBITDA due to higher other income and lower tax rate of 31% (v/s 36% in 3QFY18). PAT stood at INR603m (+72% YoY). For 9MFY19, sales/EBITDA/PAT stood at INR16.7b (+40% YoY)/INR2.9b (+26% YoY)/INR1.7b (+54% YoY).
We raise FY19/FY20 EPS by 16%/10% to INR8.9/INR10.4 to factor in strong 3Q, superior performance in formulation and improved capacity utilization. We reduce P/E multiple to 13x (from earlier 15x) to factor in the current headwinds in the US generics market. We maintain our price target at INR140 on 12M forward earnings basis. Maintain Buy.
For all recommendations report, click here
Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.Are you happy with your current monthly income? Do you know you can double it without working extra hours or asking for a raise? Rahul Shah, one of the India's leading expert on wealth building, has created a strategy which makes it possible... in just a short few years. You can know his secrets in his FREE video series airing between 12th to 17th December. You can reserve your free seat here.