Buy Granules India; target of Rs 342: Geojit

Geojit's research report on Granules India

Granules India Ltd. (Inc.) is a vertically integrated, high growth pharmaceutical company headquartered in Hyderabad, India. The company manufactures Active Pharmaceutical Ingredients (API), Pharmaceutical Formulation Intermediates (PFI) and Finished Dosages (FD). Driven by higher sales in the USA and Europe, FY23 revenue grew by 20% YoY to Rs. 4,512 cr, despite the continued price erosion in the US market. EBITDA climbed 27% YoY to Rs.914 cr, owing mostly to increased business across all major markets. EBITDA margin expanded by 110 bps to 20.3%. Resultantly, Adj PAT was recorded at Rs.517 cr (+25% YoY). Operating cash flow improved from Rs. 332 cr in FY22 to Rs. 739 cr in FY23. Growth was recorded across all segments, with FD (17%), APIs (38%) and PFIs (7%). The share of APIs in the revenue mix increased from 26% to 30% YoY. Going forward, softening raw material prices, expansion into new geographies, and strengthening of key molecules through backward integration are positives for the company.

Outlook

Hence, we upgrade our rating to BUY on the stock with a target price of Rs. 342 based on 12x FY25E EPS.

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