Granules India Q2 Results Review- Inline; Gradually Ramping Supply From The Gagillapur Facility: Motilal Oswal

Motilal Oswal Report

Granules India Ltd. delivered in-line Q2 FY25 performance. The proactive measures taken to address issues highlighted in the recent U.S. Food and Drug Administration inspection led to a temporary shutdown of the Gagillapur facility. This resulted in a deterioration in revenue/Ebitda/PAT in Q2 FY25 on a YoY as well as QoQ basis.

We lower our earnings estimate slightly by 3% for FY25/FY26/FY27 to factor in:

1. the prolonged adverse impact of higher inventory of paracetamol at the industry level and

2. the gradual scale-up of the Gagillapur facility.

We value Granules India at 20 times 12 months forward earnings to arrive at a target price of Rs 680.

Granules India continues to work toward building a pipeline comprising central nervous system/ADHD products, MUPS-based products, oncology products, liquids, and nasal sprays. This would not only further diversify the portfolio from legacy products but also drive better profitability of the overall business. Accordingly, we expect a 29% earnings CAGR over FY25-27. Reiterate Buy.

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