EUR 120.00 For Business Accounts Only

MOSL: GRANULES INDIA (Buy)-On track to build product pipeline as well as capacity

GRANULES INDIA: On track to build product pipeline as well as capacity

(GRAN IN, Mkt Cap USD1.2b, CMP INR371, TP INR440, 18% Upside, Buy)

 

Availability of key starting materials to improve over near term

• Granules India (GRAN) delivered a better-than-expected 1QFY22 performance, led by better off-take in the Intermediates (PFI) and Finished Dosage (FD) segments. The impact of the sharp rise in key starting materials (KSM) for Paracetamol was offset by controlled opex, driving better-than-expected profitability during the quarter. The improved availability of KSMs and new launches would further enhance the performance going forward.
• We marginally tweak our EPS estimate for FY22/FY23E, factoring in a) the easing of the supply situation for KSMs and b) higher logistic costs. We continue to value GRAN at 15x 12M forward earnings to arrive at TP of INR440. We remain positive on GRAN on the back of a) a robust base business, comprising core molecules, b) an expanding portfolio and geographic reach, and c) operating cost efficiencies. Maintain Buy.

 High cost of raw materials offset by controlled opex

• GRAN’s 1QFY22 sales grew 16% YoY to INR8.5b (est. INR8.2b).
• Growth was led by 24% YoY growth in PFI (7b; 20% of sales) and 18% YoY growth in FD (INR4.5b; 54% of sales). The Active Pharmaceutical Ingredients (API) segment (INR2.2b; 26% of sales) grew at a moderate rate of 6% YoY.
• The gross margin contracted 600bp YoY to 54.2% due to an increase in KSM prices, especially for Paracetamol, and a reduction in export incentives.