Buy Granules India; target of Rs 700: Sharekhan

Sharekhan's research report on Granules India

Revenues stood at Rs. 957 crore, falling 19% y-o-y and 18% q-o-q, falling 5% short of our estimates. EBITDA was Rs. 193 crore, down 9% y-o-y and 22% q-o-q, and 6% below our estimates. Margins stood at 20%, reflecting an 11bps decrease q-o-q, a 24 bps increase y-o-y, and 4 bps below our estimates. Company voluntarily halted production at the Gagillapur plant in September 2024 to reevaluate any potential risks related to observations from the USFDA. Production was subsequently resumed in a staggered manner in October. Company has meaningful products in its portfolio, like Metoprolol, Ibuprofen, etc., and backward integration of its key products, which will continue to increase margins.

Outlook

Hence, we maintain a Buy on the stock. At CMP, the stock trades at valuation of ~21x/18x its FY2026E/FY2027E earnings and arrive at a PT of Rs 700 per share.

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