Jackey’s Column     

Published: Dec 15, 2022
Updated: Dec 15, 2022

Stock Analysis: Granules India

A strong investment bet stock giving bullish signal

Granules, founded in 1984, is a vertically integrated large-scale pharma company offering the entire value chain in the manufacturing of APIs, intermediaries and finished dosages with a great product mix of paracetamol, ibuprofen, metformin, methocarbamol and guaifenesin.

The company has 7 manufacturing units, of which 6 are in India and one in the US. It has a presence in 80+ countries and caters to 300+ customers.

The company’s APIs are used in various therapeutic categories and include anti-retrovirals, anti-hypertensives, anti-histamines, anti-infectives, analgesics, anti-coagulants, anti-fibriotics and platelet inhibitors. It also offers various FDs, such as tablets, caplets and press-fit capsules in bulk, blister packs and bottles, and other speciality products for oncology. The company also exports its products.

Granules India (strong ‘buy and invest’)
CMP: 333-337
Targets: 560-650-750 (timeframe 2-3 years)
Targets: 900-1050-1200 (timeframe: extra long term of 3-5 years)

Consider: Granules India has grown from strength to strength on the financial front all these years. During the last 12 years sales turnover on consolidated basis has shot up around eight times from Rs. 455 crore in the fiscal 2011 to Rs. 3765 crore in the fiscal 2022 with operating profit spurting by 12 to 13 times – from Rs. 57 crore to Rs. 727 crore and the profit at net level skyrocketing by around 20 times – from Rs. 21 crore to Rs. 413 crore during this 12 year period. The company’s financial position is very strong with reserves at the end of March 31, 2022 standing at Rs. 2573 crore – almost 103 times its equity capital of Rs. 25 crore.

With a view to diversify its product range the company has acquired Auctus Pharma which has moved Granules into the active pharmaceutical ingredient (API) space. Additionally, the company has tamed up with Ajinomoto Omnichem to venture into the licenced manufacture of patent – protected product for regulated markets, Known as contract Research and Manufacturing Services (CRAME). These developments will push up topline as well as bottomline of the company going ahead.

The company’s fundamentals are quite healthy. For the fiscal 2022, the company’s book value is Rs 104.32, debt:equity 0.42, EPS 16.66, RoCE is > 15% for the past 3 years, face value of Re 1 and dividend of Rs 150 per cent.

Looking at the technical charts, as per our study, the stock has broken out of a medium-term channel formation as well as a long-term symmetrical triangle pattern visible as shown, which is a strong bullish signal for the long term.

Our targets remain 560-650-750 in the next 2 years, while the long-term targets are 900-1050-1200 for a 3-5 year timeframe.