Add Granules India Ltd for Target Rs. 835 by Choice Institutional Equities
Next Phase of Growth Driven by CDMO Scale-up and Product Mix Upgrade
We maintain a positive stance on the company, supported by its ability to scale up new launches, strategic shift towards complex generics and ramp-up in the CDMO peptides segment. Further upside hinges on ANDA approvals from the Gagillapur facility post clearance. We expect a revenue CAGR of 18.4% over FY26–29E. EBITDA margin may see near-term pressure due to West Asia-related RM inflation and supply chain disruption; however, increasing CDMO contribution should support margin expansion in the medium term. We revise FY27E estimate upwards by 1.1% and introduce FY29E. We continue to value the stock at 20x FY28–29E EPS (unchanged), resulting in a revised TP of INR 835 (earlier INR 690). Given recent stock appreciation, we downgrade the rating to ADD. A PEG of 0.8 further gives confidence to our valuation.
Broad-based Earnings Beat Driven by Strong Margin Expansion
* Revenue grew 22.8% YoY / 6.0% QoQ to INR 14,706 Mn (vs. CIE estimate: INR 15,381 Mn).
* EBITDA grew 39.5% YoY / 14.3% QoQ to INR 3,521 Mn; margin expanded 287 bps YoY / 174 bps QoQ to 23.9% (vs. CIE estimate: 22.8%).
* PAT increased 32.6% YoY / 34.2% QoQ to INR 2,016 Mn (vs. CIE estimate: INR 1,912 Mn).
Post-Gagillapur Recovery, Complex Generics and CDMO Drive 19% CAGR
Following a setback in FY25, FY26 witnessed healthy growth across segments, a trend expected to sustain into FY27E. We forecast double-digit revenue growth led by:
* API and PFI: API growth to be supported by higher Paracetamol prices and launches in differentiated APIs. PFI, largely used for captive consumption, should aid margin stability over time.
* FD: Strategic shift towards complex generics to remain a key growth driver, supported by launches in high-barrier segments (ADHD, oncology) and rampup of the Genome Valley facility.
* Peptides/CDMO: Fast-scaling new segment with strong traction; turned EBITDA positive in Q4 and is targeted to reach PAT profitability in FY27E. We expect sustained momentum with a medium-term CAGR of ~20%. Overall, the company remains well-positioned across segments, with EBITDA margin expansion dependent on successful product ramp-up and CDMO scale-up.
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SEBI Registration no.: INZ 000160131
