Buy Granules India; target of Rs 410: Motilal Oswal

Motilal Oswal 's research report on Granules India

Granules India’s (GRAN) efforts of building complex products should transform into money-making opportunities for the company over the next 12-18 months. GRAN has received 7 ANDA approvals over the past 12 months, which has less than 5 competitors. Specifically, the recent ANDA approval for GRAN’s g-Focalin XR (market size of USD556m and considering 5 peers), we expect the company to garner USD35m on an annualized basis post launch of the product. We remain positive on GRAN due to better growth prospects in the Formulations (FD) business, new product additions in the API segment, and reduced costs owing to backward integration. We have raised our EPS estimate by 16%/13% for FY21/FY22E to factor in the upside from limited-competition products.

Outlook

We have also raised P/E multiple to 15x (from 14x earlier) to factor in the increasing capabilities of GRAN’s niche launches. Accordingly, we arrive at a TP of INR410 on 12-month forward earnings basis. Re-iterate Buy.

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