Granules India hits fresh record high of Rs 384; rallies 24% in 2 weeks

Analysts expect launches in formulations and additional capacity in pharmaceutical formulation intermediate (PFIs) to be key growth drivers

Shares of Granules India hit a fresh record high of Rs 383.70, up 5 per cent on the BSE, in the intra-day trade on Thursday, gaining 24 per cent in the past two weeks on expectation of strong earnings going-ahead. In comparison, the S&P BSE Sensex was down 0.94 per cent during the same period.

The first quarter (April-June) of FY21 turned out to be the best-ever quarter for the company as it posted highest ever GPM (gross profit margin) and EBITDA (earnings before interest, taxes, depreciation, and amortization) margin in the company’s history.

This was on the back of gain in market share, new formulation launches and product optimisation. In the wake of continued good performance, analyst at KRChoksey Shares and Securities has positively revised EBITDA/PAT estimates for FY21E by 14.0 per cent/14.7 per cent.

Granules India is engaged in manufacturing of Active Pharmaceutical Ingredient (API), Pharmaceutical Formulation Intermediate (PFI) and Finished Dosage (FD).

On August 22, Granules India had announced that its subsidiary company Granules Pharmaceuticals Inc had received approval from the US Food & Drug Administration (US FDA) for Ramelteon Tablets 8 mg, a bioequivalent to the reference listed drug product (RLD), Rozerem Tablets, 8 mg, of Takeda Pharmaceuticals USA.

"Ramelteon Tablets are used for the treatment of insomnia characterised by difficulty with sleep onset. Ramelteon Tablets had US sales of approximately $33 million MAT for the most recent twelve months ending in June 2020 according to IQVIA Health," it said.

Analysts expect Granules India to post revenue growth of 15.7 per cent/15.5 per cent in FY21E/FY22E on the back of new product launches in the US from company’s US subsidiary (Granules Pharmaceuticals Inc) and rising contribution from FD with company’s focus on higher value and higher margin business segments of FD.

"The transformation from a pure API company to a front-end formulator has sweetened the company's operating profile. Besides product rationalization, benefits of backward integration and higher utilization of existing facilities are likely to boost margins. The strong demand for key products (Metformin, paracetamol, ibuprofen) due to Covid-19 has translated to a robust Q1 for Granules. Ahead, we expect launches in formulations and additional capacity in PFIs to be key growth drivers," analysts at Anand Rathi Share and Stock Brokers said company update.

At 02:57 pm, Granules India erased its early morning gains and was trading 0.6 per cent lower at Rs 363, as compared to 1.5 per cent rise in the S&P BSE Sensex. A combined 6.2 million shares had changed hands on the counter on the NSE and BSE till the time of writing of this report.