Granules India - Q2FY21 Result Update - ICICI Securities

Q2 revenues grew 22.7% YoY to Rs. 858 crore on the back of strong growth across segments. Formulations (FD) grew 22.4% YoY to Rs. 430 crore, API grew 17.2% to Rs. 255 crore and PFI grew 32.6% to Rs. 173 crore. EBITDA margin improved 935 bps YoY to 29.9% due to change in product mix, higher operational efficiency. EBITDA grew 78.6% YoY to Rs. 256 crore. PAT grew 70.8% YoY to Rs. 164 crore. Delta vis-à-vis EBITDA was mainly due to higher tax rate.

Valuation & Outlook

Q2FY21 results were above I-direct/Street estimates on all fronts. After achieving critical mass in commoditised but important products in the last few quarters, Granules has been steadily expanding its reach into formulations with a vertically integrated model. This bodes well at a time when generic supply script globally is likely to be rewritten in the post-pandemic era that would be more conducive for vertically integrated players like Granules. Apart from a strong quarterly performance, the management is looking to sustain 27%+ EBITDA margins for FY21 with YoY bottomline growth of ~65% (similar to FY20). We like Granules' clear vision to play on its strength of economies of scale and gradually expand into more complex products/forms to improve margins. Sustained margin expansion is likely to support FCF generation despite brownfield capex lined up till FY23E. We maintain BUY with a target price of Rs. 460 (15x of FY23E EPS of Rs. 30.6).

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_Granules_Q2FY21.pdf

Shares of GRANULES INDIA LTD. was last trading in BSE at Rs.385.75 as compared to the previous close of Rs. 391.65. The total number of shares traded during the day was 102761 in over 3981 trades.

The stock hit an intraday high of Rs. 403.4 and intraday low of 381.85. The net turnover during the day was Rs. 40407146.

Source : Equity Bulls

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