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Granules India Limited

* Headquartered in Hyderabad, Granules India is one of the largest manufacturers of APIs like Ibuprofen, Metformin, Guaifenesin, Paracetamol and Methocarbamol for both the developed as well as emerging markets. Currently, it has eight manufacturing plants and presence in over 60 countries and has more than 250 customers. It operates in three verticals namely Active Pharmaceutical Ingredient (API), Pharmaceutical Formulation Intermediates (PFI) and Finished Dosage (FD). In terms of revenue, FD contributes 53%, API contributes 28% and PFI contributes 19%.

* Granules reported strong set of numbers in Q4FY21 wherein revenue grew by 33.2% YoY led by market share gains and new customer additions. Better realizations and lower tax rate resulted in a net profit growth of 292%.

* Going forward, the company plans to expand its portfolio range with addition of differentiated and limited competition products in API/FPI. Therefore, with adequate capacity in place and expected products approvals in pipeline from USFDA augurs well for the growth prospect of the company. Further, Granules has increased focus towards high margin products which bodes well for improved margin profile in the coming years.

Technical Outlook

* Granules has had a prolonged consolidation phase after listing which lasted for nearly seven years. It hovered in a range during that phase and formed a reversal pattern as well.

* It finally witnessed a breakout from that range in the latter part of 2012 but the actual recovery started from mid-2013. It surged almost vertically from a single-digit mark to 145+ levels in the next two and a half years. Such a sharp move is usually followed by a consolidation phase and it also spent nearly 5 years in a range thereafter.

* It surged almost vertically from 140 to a new record high i.e. 437.51 levels, after the breakout from the consolidation range in February 2020. It has been trading with a corrective bias for the last 8 months and formed a strong base around 300 levels. The chart pattern combined with buoyancy in the pharma pack indicates resumption of the uptrend soon. We thus recommend creating longs at the current levels (CMP-340.60) and add more on dips around 330. Traders should maintain a closing stop loss at 308 and hold for the target of 385.

Technical Chart (Daily)

Buy Granules India Limited : Accumulation Range 330-342 CMP 340.6 Target 385 Stop Loss 308 Time Horizon 2-3 Months

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