Buy Granules India Ltd For Target Rs.640 By Choice Broking Ltd
Gagillapur Clearance, Genome Valley Ramp-up to Drive Growth
We maintain our positive stance on the company, supported by its ability to scale up operations following the expected Gagillapur clearance by Q3FY26 and the ramp-up of its Genome Valley facility. These developments should ease additional remediation and scale-up cost, driving margin expansion from FY27E. Furthermore, the CDMO/Peptides segment via Senn Chemicals is expected to contribute meaningfully to growth. We have revised our FY27E estimates downward by 4.0%. We now value the company on FY27E and FY28E earnings at 20x (unchanged), arriving at a target price of INR 640 (unchanged) and maintain our BUY rating. Key Risk to Our Investment Case: Delay in FDA approval for Gagillapur and slower-than-anticipated ramp-up at Genome Valley
Soft Quarter; Margins and PAT Under Pressure
? Revenue grew 2.6% YoY/1.1% QoQ to INR 12.1 Bn (vs. CIE estimate: INR 12.4 Bn).
? EBITDA declined 4.8% YoY/2.2% QoQ to INR 2.5 Bn; margins contracted 159 bps YoY/69 bps QoQ to 20.4% (vs. CIE estimate: 20.2%).
? PAT fell 17.8% YoY/25.9% QoQ to INR 1.12 Bn (vs. CIE estimate: INR 1.23 Bn).
Gagillapur FDA Nod by Q3; Genome Valley Boosts 10Bn Dose Capacity
The Gagillapur facility, under remediation since August 2024, is expected to receive clearance by December 2025. The company submitted a full status report to the FDA on 31 July, with no concerns raised so far. It will be eligible for re-inspection in September 2025, when it will engage with the FDA. Following clearance, management intends to launch pending new approvals, which should support a strong recovery from FY27E. Meanwhile, the Genome Valley facility underwent its first FDA inspection, receiving only one procedural observation. This site adds 10 Bn doses of formulation capacity and serves as a second source of supply to the US, mitigating potential tariff-related impacts.
FD Set to Recover, Peptides to Strengthen Growth Outlook
In the Finished Dosages (FD) segment, the company has a robust product pipeline, including six launch-ready products in Europe and several large-volume prescription products in the US. Many of these represent first-to-file (FTF) opportunities, with CNS therapy leading the charge. We expect FD to sustain double-digit growth. In addition, the CDMO/Peptides segment, strengthened through the acquisition of Senn Chemicals, has begun contributing to revenue. This division will focus on high-value peptide therapies, supported by the commissioning of a dedicated R&D center by October 2025 and a commercialscale plant by the end of FY27. We anticipate strong growth in this segment, driven by the scale-up of GLP-1 and oncology products.
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SEBI Registration no.: INZ 000160131
