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Techno Funda
12 June 2016
Sensex
Nifty
Price:
26,635
8,170
INR 142
Target
Price:
Stop loss:
INR 115
Time
Frame:
Technical Rational
In short term stock was retraced from 165 levels to 100 levels and bounced backed to 61.8% of Fibonacci levels at 140.
Continuing its long term uptrend stock is expected to reach its 165 levels.
Fibonacci retracement & extension levels for the price gave us a target of 200 levels at 161.8% extension.
Fundamental View
Background:
Granules India is a fast growing global pharmaceutical company. World-class facilities for APIs, PFIs and Finished Dosages (FD). Serving
customers in over 60 countries. The company is committed to excellence in manufacturing, quality and customer service. Headquartered in Hyderabad with offices in
the U.S., U.K., Colombia and China with manufacturing facilities in India and China. Granules deploy cutting-edge science and technology with a firm commitment to
ensure good health for all. Its integrated model for manufacturing APIs (33%), PFIs (27%) and FDs (40%) makes it possible to provide products across the value chain,
which enhances competitiveness & value.
52 Week High/Low
INR 164/75.5
Bloomberg code
GRAN IN
Reuters code
GRAN.BO
Fundamental Rational
Granuless regulated markets of North America and Europe account for 60% of overall
revenue, while the balance comes from quality conscious customers in Latin America, India
Issued Equity
and ROW countries. The company entered into potentially higher margin products through
216.7
(shares in mn)
Auctus Pharma acquisition in 2014 with focus on development of new APIs through in-
house R&D.
Granules has presence in potentially higher margin CRAMS (Contract Research And
1405
ventured into manufacturing & marketing of OTC products to the retail chains in the North
Shareholding
Mar-15
Dec-15
Mar-16
Promoters(%)
American markets.
The company acquired Formulation facility in Virginia in the USA, to introduce value added
form of existing products and to concentrate into formulation R&D of complex molecules.
The company has strong presence in fist line of defense products such as Paracetamol,
48.6
49.5
51.2
FII (%)
4.0
5.8
6.4
DII (%)
0.1
1.1
1.2
Ibuprofen, Metformin and Guaifenesin. Delivered strong growth over 5 year (FY11-FY16) in
47.3
43.6
41.3
key molecules 1) Paracetamol (16% CAGR) 2) Metformin (50% CAGR) 3) Ibuprofen (15%
Others (%)
CAGR) 4) Guaifenesin (35% CAGR) & 5) Methocarbamol (21% CAGR). Going forward
increase in emphasis on finished dosages and enhanced product basket with new ANDA
Performance
%
1M
Granules
10.8
0.40
70.1
Sensex
7.06
8.68
1.8
3M
FY16-18E respectively.
The management indicated 5-6 ANDA filings from India and 1-2 ANDA filings from USA
12M
FY17. In 4QFY16, the company posted 5% YoY revenue growth to INR 3.7bn, EBITDA
grew by 60% YoY to INR 783mn and EBITDA margins improved by 723bps YoY to 21%
180
450
160
400
driven by mainly on account of operational efficiency in base business, healthy product mix
140
350
coupled with high value FD and Ibuprofen Rx launch. PAT grew by 48% YoY to INR 332
120
300
100
250
80
60
G ranules
200
R elativ e S ens ex (R H S )
150
40
100
20
50
Risks: Pricing pressure on its existing product baskets, delay in approvals for key products, adverse
regulatory inspection on its approved manufacturing facilities
Valuation Summary
Y/E March ( INR bn)
Revenue
Forward P/E
Mugilan K +91-44-30007353
FY16
FY17E
FY18E
14.3
17.2
20.8
EBITDA
2.8
3.5
4.4
PAT
1.2
1.6
2.2
EPS
5.7
7.5
9.8
28.5
30.1
31.0
PE
24.4
18.8
14.3
4.6
3.6
3.0
11.8
9.5
7.5
EV / Sales
2.3
1.9
1.6
0.5
0.5
0.7
P/ BV
EV / EBITDA
mugilank@chola.murugappa.com