Granules India surges 7%, hits record high on heavy volumes

Shares of Granules India moved higher by 7 per cent to Rs 224.70 on the BSE on Thursday on back of over two-fold jump in trading volumes. The stock of the pharmaceutical company surpassed its previous high of Rs 224.60 touched on June 16, 2020.

The trading volumes on the counter more-than-doubled with a combined 6.6 million shares changing hands on the NSE and BSE till 02:43 pm.

The company’s revenue for the quarter ended March, 2020 (Q4FY20), declined 2.2 per cent year on year (YoY) to Rs 600 crore due to restriction imposed on Paracetamol active pharmaceutical ingredients (API), pharmaceutical formulation intermediates (PFI) and finished dosage (FD). The restriction were removed for PFI and FD on April and API by the end of May.

Excluding one-time expenses of Rs 22 crore due to impairment of investment at Granules Pharmaceutical Inc (GPI), EBITDA grew 25 per cent YoY to Rs 121 crore and EBITDA margin expanded 437 bps to 20 per cent during the Q4FY20.

With the ban no longer in place, analysts at Anand Rathi Share and Stock Brokers expect growth to pick up in April-June quarter (Q1FY21) as demand for paracetamol has risen amid the Covid-19 pandemic. The brokerage firm expects Granules to aptly capitalize on the opportunity. Besides, the management is upbeat about the near-term performance and expects to beat its previous guidance of 20 per cent topline growth in FY21.

“Its dominance in key APIs (paracetamol, ibuprofen, metformin) would help Granules emerge a prime beneficiary as the Covid-19 outbreak has led to a surge in demand for such drugs. Granules is likely to retain strong traction for the next couple of years driven by formulations and the healthy contribution from new capacities,” analysts at the brokerage said in result update with target price of Rs 227 per share.

“Granules strong revenue growth will be led by resumption of Paracetamol exports and deferred sales from Q4. Margins should improve qoq due to higher US$ realizations, higher contribution from formulations and USD3mn one-off impairment charge in Q4 base,” Emkay Global Financial Services said in pharma sector update.