ICICI Direct is bullish on Granules India recommended buy rating on the stock with a target price of Rs 460 in its research report dated October 21, 2020.
ICICI Direct's research report on Granules India
Q2 revenues grew 22.7% YoY to Rs 858 crore on the back of strong growth across segments. Formulations (FD) grew 22.4% YoY to Rs 430 crore, API grew 17.2% to Rs 255 crore and PFI grew 32.6% to Rs 173 crore. EBITDA margin improved 935 bps YoY to 29.9% due to change in product mix, higher operational efficiency. EBITDA grew 78.6% YoY to Rs 256 crore. PAT grew 70.8% YoY to Rs 164 crore. Delta vis-à-vis EBITDA was mainly due to higher tax rate.
We like Granules’ clear vision to play on its strength of economies of scale and gradually expand into more complex products/forms to improve margins. Sustained margin expansion is likely to support FCF generation despite brownfield capex lined up till FY23E. We maintain BUY with a target price of Rs 460 (15x of FY23E EPS of Rs 30.6).
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