Granules India Hit Fresh 52-Week High; Brokerages Positive On Growth Prospects

Shares of Granules India climbed over 3 percent to hit fresh 52-week high of Rs 154.40 in morning trade on BSE on January 23 and looked on course to extend the gains into the second consecutive session.

The pharma company has reported a 6.16 percent year-on-year growth in Q3FY20 profit at Rs 64.03 crore, impacted by an impairment loss of Rs 32 crore in Granules-Biocause Pharmaceutical, which is now being sold by the company.

Revenue from operations in Q3 grew 11.4 percent YoY to Rs 704 crore. Operating numbers were very strong as earnings before interest, tax, depreciation and amortisation (EBITDA) surged 44 percent YoY to Rs 163.15 crore and margin expanded to 23.17 percent (from 17.93 percent) in Q3.

Brokerage firm Anand Rathi Share and Stock Brokers has a buy recommendation on Granules with a target price of Rs 181.

“Granules continues to elevate corporate governance standards. The promoter is committed to fully revoking pledged shares by the end- FY20, with debt-to-EBITDA at 1 time. We expect it to maintain strong traction for the next couple of years, driven by formulations and a huge contribution from the new capacities,” said Anand Rathi.

Anand Rathi expects revenue and PAT CAGRs of nearly 17 percent and 25 percent, respectively, over FY19-22. At the current market price, the stock trades at 8 times FY22E EPS of Rs 18.

Domestic brokerage firm Sharekhan by BNP Paribas has maintained a positive view on the stock with an upside potential of 12-15 percent.

“Granules’ business is on a strong footing. The company has reported a strong set of results for Q3FY2020 and the management is confident of sustaining the growth momentum going ahead as well,” said Sharekhan.

“Rising number of core products, approvals for new products from the USFDA and commissioning of new capacities would drive the top-line growth. We expect Granules’ top-line and the PAT to grow at a CAGR of 15 percent and 18 percent, respectively, over the next 2 years,” Sharekhan said.

Further, the board has approved a buyback offer to the extent of 4.9 percent of the total paid-up share capital, wherein the promoters would also be participating in the offer.

As per Sharekhan, after the buyback offer, the management expects the promoters pledged shares to reduce to nearly 6 percent levels against 13 percent as of December 2019 which augurs well for the company.

The scrip traded at Rs 154.05, up 3.22 percent on BSE around 11:40 hours IST.-Moneycontrol