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Granules India Ltd

Sector: Pharmaceuticals/ mid cap

Techno Funda

12 June 2016

Sensex

Nifty

Price:

26,635

8,170

INR 142

Target
Price:

Stop loss:
INR 115

Time
Frame:

Granules India - Weekly Chart

Technical Rational

Granules India Ltd. is in a long term uptrend.

In short term stock was retraced from 165 levels to 100 levels and bounced backed to 61.8% of Fibonacci levels at 140.

Continuing its long term uptrend stock is expected to reach its 165 levels.

Fibonacci retracement & extension levels for the price gave us a target of 200 levels at 161.8% extension.

Fundamental View
Background:

Granules India is a fast growing global pharmaceutical company. World-class facilities for APIs, PFIs and Finished Dosages (FD). Serving
customers in over 60 countries. The company is committed to excellence in manufacturing, quality and customer service. Headquartered in Hyderabad with offices in
the U.S., U.K., Colombia and China with manufacturing facilities in India and China. Granules deploy cutting-edge science and technology with a firm commitment to
ensure good health for all. Its integrated model for manufacturing APIs (33%), PFIs (27%) and FDs (40%) makes it possible to provide products across the value chain,
which enhances competitiveness & value.
52 Week High/Low

INR 164/75.5

Bloomberg code

GRAN IN

Reuters code

GRAN.BO

Fundamental Rational

Granuless regulated markets of North America and Europe account for 60% of overall
revenue, while the balance comes from quality conscious customers in Latin America, India

Issued Equity

and ROW countries. The company entered into potentially higher margin products through

216.7

(shares in mn)

Auctus Pharma acquisition in 2014 with focus on development of new APIs through in-

Mkt. Cap in INR bn


INR 30.3/$ 0.45

Mkt. Cap in USD bn

Avg. Daily Vol. (000)


Avg. Daily Vol. (mn)

house R&D.
Granules has presence in potentially higher margin CRAMS (Contract Research And

1405

Manufacturing Services) business through 50-50 JV with Ajinomoto Omnichem and

INR 197/$ 2.9

ventured into manufacturing & marketing of OTC products to the retail chains in the North

Shareholding

Mar-15

Dec-15

Mar-16

Promoters(%)

American markets.
The company acquired Formulation facility in Virginia in the USA, to introduce value added

form of existing products and to concentrate into formulation R&D of complex molecules.
The company has strong presence in fist line of defense products such as Paracetamol,

48.6

49.5

51.2

FII (%)

4.0

5.8

6.4

DII (%)

0.1

1.1

1.2

Ibuprofen, Metformin and Guaifenesin. Delivered strong growth over 5 year (FY11-FY16) in

47.3

43.6

41.3

key molecules 1) Paracetamol (16% CAGR) 2) Metformin (50% CAGR) 3) Ibuprofen (15%

Others (%)

CAGR) 4) Guaifenesin (35% CAGR) & 5) Methocarbamol (21% CAGR). Going forward
increase in emphasis on finished dosages and enhanced product basket with new ANDA
Performance
%

1M

Granules

10.8

0.40

70.1

Sensex

7.06

8.68

1.8

3M

filling will increase revenue and profitability.


The companys Revenue and PAT expected to grow at a CAGR of 20.6% and 35% for

FY16-18E respectively.
The management indicated 5-6 ANDA filings from India and 1-2 ANDA filings from USA

12M

FY17. In 4QFY16, the company posted 5% YoY revenue growth to INR 3.7bn, EBITDA
grew by 60% YoY to INR 783mn and EBITDA margins improved by 723bps YoY to 21%

180

450

160

400

driven by mainly on account of operational efficiency in base business, healthy product mix

140

350

coupled with high value FD and Ibuprofen Rx launch. PAT grew by 48% YoY to INR 332

120

300

100

250

80
60

G ranules

200

R elativ e S ens ex (R H S )
150

40

100

20

50

mn. Management guided for 15-17% revenue growth in FY17.


In Omnichem JV sales stood at INR 71.5mn for FY16 and management guided for
INR 1.8-2bn in FY17.

Risks: Pricing pressure on its existing product baskets, delay in approvals for key products, adverse
regulatory inspection on its approved manufacturing facilities
Valuation Summary
Y/E March ( INR bn)
Revenue

Forward P/E

P/E Fwd = 14.3, Std Dev 1 = 15.2, Std Dev -1 =


8.3, Std Dev 2 = 18.6, Std Dev -2 = 4.79, Avg =
11.7

Mugilan K +91-44-30007353

FY16

FY17E

FY18E

14.3

17.2

20.8

EBITDA

2.8

3.5

4.4

PAT

1.2

1.6

2.2

EPS

5.7

7.5

9.8

EPS growth (%)

28.5

30.1

31.0

PE

24.4

18.8

14.3

4.6

3.6

3.0

11.8

9.5

7.5

EV / Sales

2.3

1.9

1.6

Dividend Yield (%)

0.5

0.5

0.7

P/ BV
EV / EBITDA

mugilank@chola.murugappa.com