Granules India - Gagillapur Site Under A Cloud: Motilal Oswal

Motilal Oswal Report

Granules India Ltd. was issued a Form 483 with six observations for its Gagillapur site after a recent U.S. Food and Drug Administration inspection.

The observations are related to cleaning/maintenance, inadequate root-cause analysis, document management, procedures for in-process controls and air purification units.

Granules India is expected to implement remediation measures to address the issues. We await the classification of inspection from U.S. FDA to understand the sustainability of compliance with regulatory guidelines. 

Currently, there is no major product pending for approval and is built into estimates from this site. We await clarity on the impact of remediation measures on the ongoing business.

We expect a 36% earnings CAGR over FY24-26. We value GRAN at 18 times 12 months forward earnings to arrive at a target price of RS 680. We reiterate our Buy rating on the stock.

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