Buy Granules India; target of Rs 612: Deven Choksey

Deven Choksey's research report on Granules India

Granules’ revenue came in at INR 11,974 Mn., up 1.8% YoY (+5.3% QoQ), below our estimates (-9.6%) impacted by weaker growth traction in API and PFI segments. EBITDA stood at INR 2,524 Mn., down 1.3% YoY (+9.6% QoQ), sharply below our estimates (- 12.0%), led by higher operating expenses. Adjusted Net profit stood at INR 1,213 Mn., down 6.5% YoY (+3.1% QoQ), sharply below our estimates (-25.1%), led by subdued growth, poor operational performance, higher depreciation expense and lower other income. We have revised our FY26E/FY27E EPS estimates by -6.0%/-12.4%, respectively, as we bake in weaker H1FY26 led by regulatory risk from the FDA, more gradual ramp up of margins led by weak operating leverage and lower other income. We believe that long-term growth will be driven by scaling up complex generic's portfolio, and its Genome Valley facility.

Outlook

We value Granules at 20.5x FY27E EPS, implying a target price of INR 612. We maintain our “BUY” rating on the stock.