Broker’s call: Granules India (Accumulate)

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Target: ₹464

CMP: ₹392.70

Granules India 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).

During H2-FY24, topline reported flat growth to ₹2,175 crore, due to price erosion in European markets and the continued impact of cybersecurity issues. EBITDA was reported at ₹350 crore, down by 23 per cent y-o-y, and EBITDA margin declined by 485 bps YoY to 16 per cent. Resultantly, Adj. PAT was reported at ₹150 crore (-45 per cent y-o-y), due to higher interest charges.

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A new packaging facility in Virginia, USA, was commissioned and is now fully operational. The management is expecting that this will help to improve working capital and reduce uncertainty in sales.

Going forward, softening raw material prices, expansion into new geographies, and strengthening of key molecules through backward integration are positive in the long term. However, delayed launches of some of the molecules are likely to impact revenue.

Therefore, we downgrade our rating to Accumulate with a target price of ₹464 based on 16x FY26E EPS.