Buy Granules India, target price Rs 625: Motilal Oswal Securities

Motilal Oswal Securities has a buy call on Granules India Ltd. with a target price of Rs 625. The current market price of Granules India Ltd. is Rs 535.45. Granules India, incorporated in 1991, is a Mid Cap company with a market cap of Rs 13012.78 crore, operating in the Pharmaceuticals sector.

Granules India's key products/revenue segments include Pharmaceuticals and Other Operating Revenue for the year ending 31-Mar-2024.

Financials

For the quarter ended 30-09-2024, the company has reported a Consolidated Total Income of Rs 969.87 crore, down -17.94% from last quarter Total Income of Rs 1181.93 crore and down -18.57 % from last year same quarter Total Income of Rs 1191.02 crore. The company has reported net profit after tax of Rs 97.23 crore in the latest quarter.

Investment Rationale
Granules India has recorded a healthy 10% earnings CAGR over FY19-24. Given the company's focus on building a niche pipeline in the oncology space, large-volume products, innovative tech-based products, and backward integration, we estimate a 29% earnings CAGR over FY25-27. However, the regulatory inspection at Gagillapur will be a near-term hurdle for growth in the US markets, and Granules India is working on implementing remediation measures in this plant. Motilal Oswal Financial Services awaits further clarity on the business prospects following the OAI classification at Gagillapur. The brokerage has lowered the PE multiple from 20x to 18x to factor in the escalation of the regulatory issue and arrive at a target price of Rs 625. They have reiterated a BUY.

Promoter/FII Holdings
Promoters held 38.87 per cent stake in the company as of 30-Sep-2024, while FIIs owned 19.49 per cent, DIIs 14.85 per cent.