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Execution across Key Growth Levers Continues to Impress

We expect GRAN to sustain its growth trajectory alongside continued margin expansion. We believe this will be driven by a higher contribution from complex generic products, new approvals from the GGP and GLS facilities, oncology product launches and scale-up in the CDMO business. We forecast a revenue CAGR of 21% over the next three years, with EBITDA margin of 22–24%. Further margin expansion could be supported by the scale-up of newly-approved products and an increasing contribution from the CDMO business. We raise our FY27E/FY28E EPS estimate by 6.6%/16.1%, reflecting an improving outlook for FDA remediation and the product pipeline. We value the stock at 25x FY28E EPS, revise our TP to INR 1,110 and upgrade our rating to ‘BUY.’ In addition, a PEG ratio of 0.8x provides further comfort on the current valuation

Soft Topline Overshadows Healthy Margin Expansion

* Revenue grew 22.0% YoY / 0.4% QoQ to INR 14,768 Mn (vs. CIE estimate: INR 16,388 Mn).

* EBITDA grew 37.4% YoY but declined 3.7% QoQ to INR 3,389 Mn; margin expanded 256 bps YoY but contracted 99 bps QoQ to 22.9% (vs. CIE estimate: 24.0%).

* PAT increased 59.8% YoY but declined 10.7% QoQ to INR 1,800 Mn (vs. CIE estimate: INR 2,169 Mn).

Post-Gagillapur Recovery, Complex Generics and CDMO Drive 21% CAGR

GRAN has delivered another quarter of sustained growth alongside margin expansion, reinforcing our view that its strategic initiatives are now translating into tangible execution. With an increasing contribution from complex generics, continued momentum in the CDMO business and stabilising API pricing, we expect this trajectory to persist and forecast earnings to expand at a CAGR of 20–22% over the next three years.

* Finished Dosage: Complex generics now account for 50% of segment revenue, up from 39% a year ago, with the management maintaining its strategic focus on expanding this portfolio. At present, the company has 50 dossiers awaiting approval, of which approximately 50% are in the complex generics portfolio. We believe the rising contribution from this portfolio should not only support stronger revenue growth but also drive further margin expansion through an improved product mix.

* Peptides/CDMO: While the CDMO business at present contributes less than 5% of overall revenue, it remains a key pillar of the company's long-term growth strategy. The management expects robust growth, supported by new customer project wins, scale-up activities, commercial production from the India manufacturing site and operating leverage arising from a favourable shift in product mix.

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