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Centrum Broking
Granules India (Buy)
Target: ₹315
CMP: ₹264.45
Amid the extraordinary times, Granules India posted record quarterly performance well ahead of our estimates. The record quarterly performance with revenue growth of 24 per cent YoY was driven by spiked demand around the pandemic and spill-over from previous quarter along with market expansions in the core products.
Improved product mix has contributed well to the quarter as PFI and FDs contributed nearly 71 per cent of sales taking gross margins to 60 per cent and EBITDA margins to 25 per cent. The quarter still has some impact of higher employee costs with gross margins overheads reversal. Also, Metformin ER 750 mg recall impacted the quarter. The core five products contributed 85 per cent of revenues this quarter.
Management has expended their guidance considering the strong demand and product mix, FY21 earnings growth at 30 per cent and FY22 earnings growth at 25 per cent.
GIL has 12 pending ANDA approvals and expects 7-8 filings during the fiscal along with 5-6 launches. The company will focus its efforts on inventory control and cash-to-cash cycle to sustain EBITDA margins at 23 per cent.
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