Buy This Pharma Stock For 20% Returns, Reported Robust Revenue Of Rs 1,030 Crore: Geojit

The leading brokerage firm Geojit Financial Services has suggested investors to buy the stocks of Granules India Ltd for a target price of Rs 323. It can jump 20% in 12 months investment period. The company has recorded growth across all segments with FD (14%), APIs(28%) and PFIs (77%). The share of PFI increased from 18% to 25% YoY. Going forward with future new plans the company expects an improved growth trajectory.

Granules India Ltd - Stock Overview

The share price of Granules India fell 1.56% on Friday and closed at the Current Market Price (CMP) of Rs 269.20. It was opened at Rs 273.50, while the previous close on Thursday was Rs 272.24. The brokerage has estimated a target price of Rs 323 for an investment period of 12 months. According to the CMP and the estimated Target Price, the stock has the potential to gain 20% in the given investment period of 12 months by the brokerage. Data shows, the stocks of Granules India have fallen near 18% in the last 1 year, while in the last 1 month its share price was stable. According to the NSE, it touched the 52 week low of Rs 232.10 last month on 12. On the other hand, it hit the 52 week high of Rs 404.80 last year on 4 August.

Reported robust revenue, Growth across all geographies and segments

According to the brokerage firm, "Q4FY22 revenue was reported at Rs.1030 crore (up29% YoY, 3% QoQ) supported by new product launches and increase in selling prices. EBITDA contracted to Rs. 193 cr (-5% YoY) on account of increase in the cost of KSMs & Solvents and also due to increasing freight cost and pricing pressure in the US. Adj PAT was reported at Rs.111 crore (-13% YoY, 10% QoQ). Unrecovered freight cost, raw material expenses and US price erosion has resulted in a bottom-line decline this year. The company witnessed a higher revenue contribution from regulated markets (73% of the total revenue). Revenue from Europe increased to 21.5% YoY from 18% due to an increase in selling prices for Paracetamol. From the MUPS block, the company has two approvals and 6 filings so far."

Further, the Share of PFIs increased in revenue mix. "Pharmaceutical Formulation Intermediates (PFI) grew 78% YoY to contribute 24.9% to revenue while FD and Active Pharmaceutical Ingredients (API) segments contributed 24.1% and 51% respectively. With supply constraints in API, the company maximised profitability by optimization of the portfolio. However, the short supply of Para Amino Phenol (PAP) resulted in loss of Paracetamol API business," the brokerage added.

Future plans in focus

New plans in focus Going forward, Granules will be built on the focus of R&D, technology and sustainability. The company will continue to pass on a substantial amount of its costs to its customers thereby reducing the burden on their margins. The company plans on creating a strong R&D engine for both API finished formulations and chemicals intermediates while strengthening their core business. The growth for Europe in the upcoming years will be driven majorly by a partnership business model. The oncology block in progress is primarily for CMO and CDMO business.

Buy for a target price of Rs 323/share

"Despite various headwinds in the short-term, we continue to remain optimistic about the company's long-term profitability and growth prospects. Granules expect good visibility in the next few years by reducing their dependency on imports and passing on the increased prices to the customers. Hence, based on a healthy balance sheet, new launches, strong cost management and focus on the formulation business, we reiterate our "Accumulate" rating with a target price of Rs.323 based on 11.5x FY24E EPS," Geojit has said in the report.

Granules India Ltd.

Granules (Inc) is a vertically integrated, high growth pharmaceutical company headquartered in Hyderabad, India. The company manufactures Active Pharmaceutical Ingredients (API), Pharmaceutical Formulation Intermediates (PFI) and Finished Dosages (FD). Over 250 customers are served by the organisation, which has a global presence in over 60 countries. Granules India is the preferred supplier for some of the world's largest pharmaceutical businesses, both branded and generic. The company operates one of the world's largest PFI and single-site FD facilities. It also houses one of the world's largest API facilities for paracetamol.

Disclaimer

The stock has been picked from the brokerage report of Geojit Financial Services Ltd. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decisions.