Comments
Motilal Oswal
Granules India (Buy)
CMP: ₹131
Target: ₹200
We recently hosted the management of Granules India at our Mid-cap conference. We surmise that the joint venture business will be impacted in the near term due to deferral of sales by a key client, though the company maintains its medium-term revenue growth guidance (of 20-25 per cent CAGR) from Omnichem JV. GRAN plans key filings (4-6 ANDAs) in 1HCY18 in the US. The impact of ramp-up in production in traditional business will be visible over the next 12-18 months.
Graules India trades at 13.7x FY19E EPS (despite assuming less than 10 per cent equity dilution). We believe the stock has the potential to deliver >50 per cent return in 12-18 months on the back of multiple re-rating (to less than 18x forward earnings) and strong PAT CAGR of about 27 per cent till FY20E. At 18x 1HFY20E EPS, fair value of the stock works out to INR200. We have cut our FY18/19E EPS by 10-12 per cent as we factor in impact of loss of sales in JV business and lower margins.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.